El Salvador Poverty Assessment: Strengthening Social Policy, Report No

Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No: 32648-SV

Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$21.O MILLION

TO THE

TO THE REPUBLIC OF EL SALVADOR

Public Disclosure Authorized FOR A

SOCIAL PROTECTION PROJECT September 26,2005

Human Development Sector Management Unit Central America Country Management Unit Latin America and the Caribbean Region Public Disclosure Authorized

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. EL SALVADOR CURRENCY UNIT = US$

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS ACE Community Education Association ACOLGUA Lencas Community Association in Guatajiagua (Asociaci6n de Comunidades Lencas en Guatajiagua) ADESCO Community Development Association (Asociaci6n de Desarrollo C omunit ario) AIEPI Integrated Care ofChildhood Diseases (Atenci6n Integrada a las Enfermedades Prevalentes de la Infancia) AIN-C Integrated Care for Children (Atenci6n Integral en Nutrici6n a Nivel Comunitario) ANDA National Water and Sewage Administration APL Adaptable Program Lending ARI Acute Respiratory Diseases (Enfermedades Respiratorias Agudas) CABEI Central American Bank for Economic Integration CAFTA Central American Free Trade Agreement CAS Country Assistance Strategy CCNIS National Salvadoran Indigenous Coordination Council CCT Conditional Cash Transfer CDE School Directive Counsel (Consejo Directivo Escolar) CONCULTURA National Council for Art and Culture DGT General Treasury Directorate DIGESTYC National Directorate for Statistical and Census (Direcci6n General de Estadisticas y Censos) DUI Identity Document (Documento Unico de Identidad) EDUCO Community-Managed Education Program in Rural Areas (Programa Educativo con participaci6n de la Comunidad) EHPM National Household Survey (Encuesta de Hogares y Prop6sitos Midtiples) ERA Acute Respiratory Diseases (Enfermedades Respiratorias Agudas) FESAL National Family Health Survey (Encuesta Nacional de Salud Familiar) FISDL Social Investment Fund and Local Development FLACSO Latin American Faculty of Social Science (Facultad Latinoamericana de Ciencias Sociales) FMR Financial Monitoring Report FONAVIPO National Fund ofPopular Housing (Fondo Nacional de Vivienda Popular) FUSADES Salvadoran Foundation for Economic and Social Development (Fundaci6n Salvadorefia para el Desarrollo) GDP Gross Domestic Product GOES Government ofEl Salvador IBRD Intemational Bank for Reconstruction Development ICB International Competitive Bidding IDA International Development Association FOR OFFICIAL USE ONLY

IDB Inter American Development Bank IPDP Indigenous People Development Plan IPSAS Cash Basis International Public Sector Accounting Standard ISA International Standards on Auditing ISSS Salvadoran Social Security Institute (Instituto Salvadoreiio de Seguro Social) KFW Kreditanstalt fir Wiederaufbau LCS LCR Sector Units LIL Learning and Innovation Loan MDG Millennium Development Goal MINED Ministry ofEducation MOE Ministry ofEducation MOH Ministry ofHealth MSPAS Ministry of Public Health and Social Assistance NCB National Competitive Bidding NGO Non-Governmental Organization PAE Annual School Plan PAM World Action Plan (Plan de Acci6n Mundial) PCN Project Concept Note PCU Project Coordinator Unit PEI Institutional Education Project PHC Primary Health Care PHRD Special Fund for Policy and Human Resources Development PIC Public Information Center PID Project Information Document PlU Project Implementation Unit POA Plan of Action PRA Participatory Rural Appraisal QCBS Quality and Cost Based Selection WQ Request for Quotations RHESSA Earthquake and Emergency Rec. and Health Services Extension Project RNPN National Registry of Persons (Registro Nacional de Personas Naturales) RVP Regional Vice President SBD Standard Bidding Documents SIBASI Basic Comprehensive Health System (Sistema Basico de Salud Integral) SIL Specific Investment Loan STP Technical Secretariat of the Presidency TOR Terms ofReference UNDP United Nations Development Programme USAID United States Agency for International Development

Vice President: Pamela Cox Country ManagerDirector: Jane Armitage Sector Manager: Helena Ribe Sector Leader: Laura Rawlings Task Team Leader: Andrew D. Mason

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

EL SALVADOR Social Protection project

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues...... 1 2 . Rationale for Bank involvement ...... 5 3 . Higher level objectives to which the project contributes ...... 6 B. PROJECT DESCRIPTION ...... 7 1. Lending instrument ...... 7 2 . Project development objective and key indicators ...... 7 3 . Project components ...... 8 4 . Lessons learned and reflected in the project design...... 16 5 . Alternatives considered and reasons for rejection ...... 17 C. IMPLEMENTATION ...... 19 1. Partnership arrangements ...... 19 2 . Institutional and implementation arrangements...... 20 3. Monitoring and evaluation ofoutcomes/results ...... 24 ... 4 . Sustalnablllty...... 25 5 . Critical risks and possible controversial aspects ...... 26 6 . Loan conditions and covenants ...... 28

D . APPRAISAL SUMMARY ...... 28 1. Economic and financial analyses ...... 28 2 . Technical ...... 29 3 . Fiduciary ...... 33 4 . Social...... 34 5 . Environment...... 35 6 . Safeguard policies ...... 35 7 . Policy Exceptions and Readiness...... 35 Annex 1: Country and Sector or Program Background ...... 36 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 47 Annex 3: Results Framework and Monitoring...... 49 Annex 4: Detailed Project Description...... 54 Annex 5: Project Costs ...... 72 Annex 6: Implementation Arrangements ...... 75 Annex 7: Financial management and disbursement arrangements ...... 80 Annex 8: Procurement Arrangements ...... 85 Annex 9: Economic and Financial Analysis ...... 90 Annex 10: Safeguard Policy Issues...... 98 Annex 11: Project Preparation and Supervision ...... 111 Annex 12: Documents in the Project File ...... 112 Annex 13: Statement of Loans and Credits ...... 113 Annex 14: Country at a Glance ...... 114 Annex 15: Red Solidaria Area of Intervention .Municipalities ...... 116 Annex 16: Essential Health and Nutrition Services ...... 119 Annex 17: Support to Red Solidaria ...... 125 Annex 18: Basic Infrastructure and Equipment ...... 130 Annex 19: IBRD Map 33401 ...... 133 EL SALVADOR

SOCIAL PROTECTION PROJECT

PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSHS-DPT

Date: September 29, 2005 Team Leader: Andrew D. Mason Country Director: Jane Armitage Sectors: Other social services (1 00%) Sector ManagedDirector: Helena G. Ribe Themes: Other social protection and risk management (P);Other social development (S) Project ID: PO88642 Environmental screening category: Not Required Lending Instrument: Specific Investment Loan Safeguard screening category:

[XI Loan [ 3 Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 21.OO Proposed terms: FSL

BORROWER 82.60 0.00 82.60 INTERNATIONAL BANK FOR 21.oo 0.00 21.00 RECONSTRUCTION AND DEVELOPMENT INTER-AMERICAN DEVELOPMENT 57.00 0.00 57.00 BANK Total: 160.60 0.00 160.60

Borrower: FISDL - Fondo de Inversi loa. Av. Sur y Calle M Barrio San Jacinto, fi-ente Casa Presiden San Salvador El Salvador Tel: (503) 237-0122

Responsible Agency: Project implementation period: Start March 1, 2006 End: August 3 1, 2010 Expected effectiveness date: February 1, 2006 Expected closing date: January 3 1, 201 1 Does the project depart from the CAS in content or other significant respects? No Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [XINO [s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [XINO Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The development objective ofthe Project is to support El Salvador’s Red Solidaria program to initiate a conditional cash transfer (CCT) intervention for very poor families and their most vulnerable children in the country’s poorest municipalities.

Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 Component I- Establishing a Conditional Cash Transfer Program (US$63.6 million financed by government counterpart funds): This component would support the implementation ofa conditional cash transfer program to encourage extremely poor families to send their children 5- 15 years old to pre-school and primary education, maintain the full immunization scheme in children younger than 5 years, and regularly monitor the growth and development ofchildren aged 0-24 months.

Component I1- Expanding Provision ofBasic Health and Nutrition Services (US$lS.O million World Bank financing; US$20 million total extemal financing): This component will support the expansion ofthe existing basic package ofhealth services with a focus on matemal and child health, as well as the strengthening ofnutritional interventions based on the AIN-C integrated community nutrition model in the 100 poorest municipalities where the conditional cash transfer program will be implemented.

Component I11 - Strengthening Legal Access to Services through Expanding the Civil Registry (US$4 million): This component will support the RNPN to broaden legal access to the basic education and health services ofthe Red Solidaria by expanding the coerage ofthe civil registry system.

Component IV - Monitoring,Evaluation and Social Awareness Strategy (US$2 millionWorld Bank financing; US$6 million total extemal financing): This component will provide institutional strengthening to the Technical Secretariat ofthe Presidency (STP)- to ensure the adquate design and implementation ofthe operational rules and norms ofthe Red Solidaria Program,- effective inter-institutional and inter-sectoral coordination, an effective social communication and dissemination strategy, and appropriate supervision and monitoring ofthe Program. This component will also support the development ofa small technical team in teh Red Solidaria Unit ofthe STP, including an Executive Director (already hired from within the STP)and a small core staff, as well as provide technical support, training, and the equipment necessary to fulfill its coordination, supervision and monitoring functions.

Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10

Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: Board Presentation: 10/27/2005 (tbc)

Loadcredit effectiveness: Loan Effectiveness: 02/01/2006 (tbc)

Covenants applicable to project implementation:

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Overview The Government of El Salvador (GOES) faces a critical challenge: strengthening the human capital of the poorest Salvadorans so they can participate in and benefit from the country’s broader socio-economic progress. According to the recent Poverty Assessment for El Salvador’, the poorest Salvadorans (about 15 percent of the population) have not been able to take advantage of recent socio-economic progress, due in large part to their low levels ofhuman capital. Over one-fifth of primary school-aged children from the poorest families either did not attend school or were below the appropriate grade for their age in 2002; less than half ofthe poor children who do enroll in primary school graduate from 6th grade. Chronic malnutrition levels are 40 percent higher among the poor than the non-poor, while infant mortality rates are almost twice as high among the poor than the non-poor. To reduce poverty in a sustainable manner, therefore, ongoing efforts to promote economic growth and increase household incomes must be complemented by targeted actions to address insufficient schooling, child malnutrition, and inadequate health status among the poorest families.

Meeting this challenge requires an integrated, multi-sectoral approach to developing the human capital of the poorest Salvadorans. Indeed, the extreme poor in El Salvador face multiple barriers to accessing basic social services and, thus, to building their human capital. These include: demand-side obstacles (e.g, low incomes, direct and opportunity costs of service access), supply-side barriers (e.g, availability and quality of basic social services), legal impediments (e.g, lack of legal documentation needed for service access), and poor physical access (e.g., inadequate basic infrastructure such as roads, bridges, transportation, etc.). Building the human capital of children under the age of 15 warrants special attention. First, children under 15 represent more than one-third of the Salvadoran population, nearly 40 percent of rural residents, and the majority of poor Salvadorans. Second, investing in the human capital of children provides high social and economic returns. Thus, focusing on strengthening the human capital of this group is essential; both to improving the wellbeing of the very poor and to promoting sustained poverty reduction in El Salvador.

The challenge of strengthening the human capital of the poor is now being addressed by the Red Solidaria program, a new initiative that is at the core of El Salvador’s poverty reduction and social protection strategy.* Indeed, the Red Solidaria, which constitutes an important development in El Salvador’s social policy, includes a number of important measures to assist the poorest Salvadorans in improving their human capital. This includes targeted efforts to: strengthen poor families’ demand for education, health, and nutrition services via a conditional cash transfer program; strengthen the provision of basic services, eliminate legal barriers to social service access, and break down infrastructure-based impediments. The Project discussed in this PAD is designed to support the GOES in the design, implementation, and financing of the Red Solidaria.

‘ The World Bank (2004) El Salvador Poverty Assessment: Strengthening Social Policy, Report No. 29594-SV, June 30, 2004. The Red Solidaria program was launched on March 5,2005, by Presidential Decree No. 45. Main Country Issues El Salvador experienced a major political, economic and social transition during the 1990s, following the end of the civil war in 1991. Many important socio-economic gains have been registered in the decade-plus since the return to peace. The economy grew by an impressive 6 percent per year from 1990-1995 and, then, by an average rate of 2.8 percent from 1996-2002. Moreover, economic growth, coupled with reforms in some key social sectors and increases in social spending in the second half of the decade, has contributed to substantial reductions in poverty and improvements in basic socio-economic indicators over the period (Annex Table 1.1). Indeed, the poverty headcount has fallen by more than one-third; education levels have risen; access to basic services, such as safe water, has increased; and basic health and nutrition outcomes, such as life expectancy, infant and child mortality, and child nutrition have all improved. In several areas, including in basic education, infant mortality, and access to potable water, the gaps between the poor and the non-poor have also declined over the period.

Notwithstanding recent progress, El Salvador faces important challenges moving forward. From the perspective of reducing poverty, a key challenge relates to the fact that the extreme poor - roughly 15 percent of the population in 2002 - have not benefited proportionately from the recent socio-economic progress, and remain at risk of falling even further behind.3 Since extreme poverty in El Salvador is disproportionately rural - nearly two thirds of the extreme poor live in rural areas - those living in poor, remote rural areas are particularly vulnerable. Analysis based on a new Poverty Map for El Salvador developed with World Bank support indicates that poverty has a strong spatial dimension, with extreme poverty rates being particularly high in the 100 poorest municipalities. In these areas ofthe country, where extreme poverty rates are over 40 percent, adults have an average of only three years of schooling, and chronic malnutrition rates among children under 5 are as much as 40 percent higher than the national average. In this context, a key finding ofthe recent World Bank Poverty Assessment for El Salvador (2004) is that many of the extreme poor have not been able to take advantage of recent socio-economic progress in the country due in large part to low levels of human capital.

Main Sector Issues The findings of the Poverty Assessment suggest that special measures - beyond the traditional programs of the education and health ministries - are warranted to strengthen the human capital of the poorest Salvadorans to ensure that they have the capacity to take advantage of future socio-economic progress. Analysis of the relevant sectors highlights several key constraints that poor Salvadorans face vis-a-vis improving their access to basic education, health and nutrition services and strengthening their human capital. Indeed, the collection of evidence highlights the value of developing an integrated safety net program that can help to ensure that the poorest families in the poorest municipalities have access to basic education, health, and nutritional services.

Evidence from the education sector indicates that low household incomes and concerns about affordability (Le., demand side constraints) are critical barriers to attaining a basic education, as are issues of education quality and relevance. In this context, successive Salvadoran administrations have worked - and continue to work - to extend coverage and

For further details on El Salvador’s economic challenges, see Annex 1 and World Bank 2004.

2 improve quality of basic education, including through the current Government’s education strategy, Plan 2021. Nonetheless, data from El Salvador’s 2002 National Household Survey (EHPM) indicate that 40 percent of Salvadoran youth who do not attend school fail to do so because they cannot afford it (either that it was too expensive, they had to work, or due to direct costs of transportation, materials, or contributions to school activities). While the GOES has implemented several programs to reduce demand constraints to education, in general these programs have tended to focus on secondary or higher education rather than on access to basic education by the poorest Salvadorans. Evidence suggests that such measures hold significant potential to improve schooling outcomes among the poor in El Salvador.

In health and nutrition, the evidence suggests a combination of demand and supply side factors are also important. On the supply side, despite considerable government efforts to strengthen the organization and delivery of health services to expand coverage and improve service quality, as well as efforts to increase access to basic health and nutrition services by the poor, El Salvador still faces significant challenges in its efforts to improve health and nutritional outcomes among the extreme poor. Household survey data indicates that service quality is considered poor, due to insufficient and inadequately trained staff, long waiting periods, and irregular availability ofmedicines. Service outreach and delivery to combat chronic malnutrition also needs to be strengthened - by moving away from traditional programs that focus on food distribution and toward community-based programs oriented toward improving family knowledge and nutritional practices, promoting child growth, and preventing malnutrition. On the demand side, one quarter ofthe poor and nearly one third of the extreme poor report that they do not seek health services from Ministry ofHealth (MSPAS) facilities due to the financial costs (World Bank 2004). Indeed, both supply and demand side measures will be needed to ensure that the poorest Salvadorans, especially those in remote rural areas, have adequate access to a essential health services package and nutritional services.

Many poor Salvadorans, especially those from remote rural areas, lack proper identification and, formal legal status, which create legal impediments to basic service access. An estimated 20-25 percent ofpeople living in isolated rural areas ofEl Salvador lack identity cards, and a larger proportion lack birth certificates. This lack of legal identification is an important impediment to access to basic services, as well as to other types of government benefits. Moreover, the problem is most pressing in the poorest, more remote areas of the country. In spite of recent government efforts to strengthen the National Civil Registry (RNPN), there remains the need to strengthen its institutional capacity as well as its data, monitoring and verification systems to ensure that all Salvadorans receive legal identification, such as identity cards or birth certificates.

Until recently, El Salvador did not have a coherent or coordinated program (e.g., a safety net) to support to the poorest families in participating more fully in - and benefiting from - the country’s socio-economic progress. A recent Assessment of El Salvador’s safety net (World Bank 2002) found, for example, that in 2000 the country implemented a number of mostly small, uncoordinated safety net-type interventions - programs that, with a few exceptions, had limited outreach and impact. The Assessment found clear scope for strengthening the social safety net in El Salvador - through allocation of additional public resources to effective safety net programs and through the development of a coherent national-

3 level program to support the poorest Salvadorans in strengthening their human capital via better basic service access. Indeed, a key conclusion of the recent World Bank Poverty Assessment (2004) is that safety nets programs that enable the extreme poor to strengthen their human capital - and thus to participate more hlly in economic progress - should be a central element of the country’s poverty reduction strategy. Such a strategy should operate alongside line ministry programs and be viewed as a complement to - not a substitute for - more traditional sectoral approaches aimed at strengthening the human capital ofall Salvadorans.

Government Strategy The current GOES administration came to power in June 2004 with a platform that emphasized further poverty reduction and social progress. Indeed, development of a program to strengthen the human capital of the poorest Salvadorans and to enhance their abilities to participate in and benefit from broader economic progress has been a core element of the administration’s social policy. In this context, in March 2005, the GOES launched the Red Solidaria Program, an integrated program of targeted investments aimed at strengthening the capacity, productivity, and income of the extreme poor. To achieve its aims, the program focuses on addressing both demand- and supply-side barriers to basic social service access among the poorest Salvadorans living in rural areas. In focusing on strengthening the human capital ofthe poorest Salvadorans, the objectives ofthe program include: (i)ensuring access to basic education from pre-school through 6th grade; (ii)ensuring access to a package of basic health and nutrition services, with special emphasis on the health and well-being of young children and mothers; and (iii)improving poor children’s nutritional status. The program also includes initiatives to improve the productivity and incomes of the poorest Salvadoran households.

To achieve its goals, the Red Solidaria program is designed as an integrated, multi-sectoral strategy with three main prongs. The first two prongs focus on strengthening the human capital ofthe poor. Specifically:

0 Red Solidaria a la Familia (Family Solidarity Network) will establish a program of conditional cash transfers (CCT) for the most disadvantaged Salvadoran families living in the 100 poorest municipalities. These transfers, paid to the mother of the family, will be made in return for the family fulfilling a series of “co-responsibilities” that involve sending primary school-aged children to school and completing a number of preventive health and nutrition measures for children younger than five and pregnant women (e.g., immunization, child growth monitoring, etc.). 0 Red de Servicios Ba‘sicos (Network of Basic Services) is being designed to complement and enhance the efficacy of the CCT program by strengthening the provision of Basic education, health, and nutritional services in El Salvador’s poorest 100 rural municipalities. The Red de Sewicios Bcisicos also includes strategic infrastructure investments in the poorest municipalities, including (i)investments in potable water, sanitation facilities, and electricity for rural primary schools, public health units, and primary public health centers, and (ii) investment in roads, bridges and other infrastructure to facilitate greater (less costly) access to schools and health service facilities by the extreme poor in these areas.

4 The third prong focuses on efforts to increase the productivity and incomes of the extreme poor. Specifically:

Red de Sostenibilidad a la Familia (Family Sustainability Network) will involve small scale productive projects and micro-credit programs to support poor agricultural producers in the 100 municipalities in increasing their economic productivity and incomes, diversifying their incomes sources, and improving their economic management.

These activities are being complemented by a 2-year campaign to enhance legal security and legal access to basic services through the provision of birth certificates and/or other forms of legal identification to those families in the poorest 100 municipalities who lack such identification.

At the request of the GOES, the World Bank and the IDB are providing technical support as well as partial financing for the first two prongs of the program, along with support for GOES efforts under the Red Solidaria to enhance the legal security ofthe poor.

2. Rationale for Bank involvement

The proposed operation is the natural next step in the Bank’s ongoing collaboration with the government on poverty reduction and social policy. The World Bank and the GOES have been collaborating on poverty and social policy issues, including human capital development and social protection, for several years. The most recent round of activities began in the aftermath of the 2001 earthquakes when the government asked the Bank to analyze the poverty and social situation in the country. In this context, the Bank initiated an analytical program that generated two policy notes in 2002: one on poverty and social spending, the other on strengthening El Salvador’s social safety net. These policy notes generated demand from the GOES for a full- blown Poverty Assessment focused on strengthening social policy, as well as for technical assistance focused on developing a Poverty Map that would enable better targeting of the Government’s poverty-oriented interventions. Several key findings and messages of the Poverty Assessment - including those related to the development of a stronger safety net - served to deepen the Bank’s dialogue with the GOES and helped to create the impetus for cooperation on social policy at the operational level. The proposed Project builds on the recent analytical work and on the dialogue, as the logical next step ofthis ongoing GOES-Bank collaboration.

This project will provide support to the Government of El Salvador’s most important social initiative -the Red Solidaria Program. Since the Red Solidaria is a new program, good design and sound institutional arrangements will be critical to its success. In this context, the Project will support the design of key components as well as the establishment of the institutional mechanisms and capacity to carry out this innovative program that includes both demand and supply-side interventions, and involves several different line ministries and central government agencies. In terms of financing, the World Bank’s participation is relatively small compared to the total cost ofthe initiative; the World Bank loan will be equivalent to less than 20 percent of total Red Solidaria finan~ing.~Nonetheless, World Bank financial support will be

The project will be a five-year joint operation financed by the World Bank ($21 million), the IDB ($57 million) and GOES ($82 million) for a total of $160.6 million.

5 leveraged through the provision of crucial technical inputs, building on extensive analytical work, and on knowledge of recent international experience and best practice regarding: the development of conditional cash transfer programs, the design and implementation of successful program targeting mechanisms, and the establishment of the appropriate institutional mechanisms to foster a successful multi-sectoral program.

Project preparation and proposed implementation are being carried out jointly with the IDB. This approach directly supports GOES efforts to strengthen donor coordination while building a more coherent social policy. The proposed Project is part of a broader GOES effort to establish an integrated social protection strategy, closely linked to ongoing efforts in health, nutrition, and education. Specifically, the project will help improve social services to extremely poor and vulnerable infants, school age children and mothers as the core of a social protection strategy. The integrated, multi-sectoral design of this effort also helps the GOES to consolidate its social policy in the medium term by providing a framework through which to align diverse sector interventions financed by both Banks (and other donors) under a unified set of social policy goals. For example, this operation is closely linked to the IDB’s primary education project (in preparation), USAID’s support for improving El Salvador’s nutrition strategies, and KfW’s support to strengthen rural infrastructure. Within the World Bank, the Project builds on and complements other operations in education and health,5 helping to ensure a coherent approach to long-term human capital development in El Salvador as part of the Bank’s Country Assistance Strategy.

3. Higher level objectives to which the project contributes

The proposed operation is strongly consistent with the current Country Assistance Strategy for El Salvador. The El Salvador CAS proposes to provide support to the three main pillars of the GOES 2004-2009 Development Plan: (i)accelerating broad-based, equitable economic growth and increasing employment; (ii)improving equity through building human capital and enhancing access to basic socio-economic infrastructure, assets, and markets; and (iii)enhancing security and reducing vulnerability. The Project will support two ofthe CAS’S main pillars. For example, the proposed operation is at the core of Pillar 2, focused on supporting government’s efforts to modernize education and build a knowledge society, improve quality and coverage of health services, carry out sub-national strategies to expand access to basic social and economic infrastructure, and strengthen family assets. The Project also supports Pillar 3 of the GOES Development Plan through promoting a more coherent, effective social safety net, greater family responsibility (through program “co-responsibilities”), and improved quality of life through strengthened human capital. As noted above, the Project is coordinated with other World Bank operations being developed or implemented under the CAS, thus complementing several World Bank operations in education and health as well as El Salvador’s Development Policy Loans.

Strengthening El Salvador’s social safety net is a core element of the GOES poverty reduction strategy and a critical element in the country’s efforts to attain the MDGs. The Government has launched the Red Solidaria program that, consistent with recent World Bank analytical work, focuses on an integrated approach to strengthening the human capital of the poorest Salvadorans living in rural areas. In its efforts to ensure access to basic education from

The ongoing RHESSA project in health and the EXIT0 project in education, in preparation.

6 pre-school through 6‘h grade, ensure access to a package of health and nutrition services focused on the well-being ofyoung children and mothers, and improve child nutrition, it will, at the same time, contribute to progress toward attaining several key MDGs. Specifically, this Project will support GOES efforts to meet four key MDGs, including: (i)Goal 1, reducing poverty and child malnutrition by half; (ii)Goal 2, achieving universal primary education; (iii)Goal 4, reducing child mortality by two thirds; and (iv) Goal 5, improving maternal health.

The Red Solidaria program comprises an important first step in the development of a comprehensive social protection strategy for El Salvador. The Project will support government’s efforts to develop the Red Solidaria, an multi-sectoral human development strategy that is well-integrated into the Government’s National Social and Economic Plan . By focusing on the development of a safety net that emphasizes human capital development, the program provides an important foundation for long-term and sustained poverty reduction. Moreover, the Project will work to strengthen the institutional capacity of several Central Government agencies - to direct, coordinate, and carry out a multi-faceted, multi-sectoral social policy, starting with the country’s 100 poorest municipalities. These institutional mechanisms, that are being developed and strengthened during Project preparation and implementation, will enhance government’s capacity to broaden and scale-up its poverty reduction and social protection efforts in the future. This program is fostering the commitment of officials at the highest levels of the Salvadoran Government, both in the Presidency and across a number of relevant ministries and agencies and, as such, will serve as a model for future inter-ministerial and inter-agency coordination in the pursuit ofhigh-level development goals.

B. PROJECT DESCRIPTION

1. Lending instrument

The proposed lending instrument is a Specific Investment Loan (SIL). A SIL was chosen because the Project emphasizes: (i)capacity building to support and sustain a social protection strategy for El Salvador’s extreme poor; and (ii)development and implementation of the first phase ofthis strategy, a conditional cash transfer program targeted to extremely poor families in the poorest municipalities of the country. The Project will support GOES efforts to develop and strengthen the necessary institutional mechanisms and capacity within the relevant Government agencies, as well as foster the conditions for program sustainability and possible future expansion.

2. Project development objective and key indicators

The Project development objective is to improve the education, health, and nutrition of Salvadoran children living in the rural areas of 100 poorest municipalities. Specifically, the Project will support the government’s efforts to expand the Red Solidaria Program to 80,000 families living in rural areas of extremely poor municipalities over a five-year period. In this context, it is expected that as a result of the Program: (i)net school enrollment will increase by 6 percentage points; (ii)children who receive a complete set of immunizations will increase by 5 percentage points; and (iii)the incidence of malnutrition rate (measured as underweight rates) will decline by 4 percentage points, in the Project area, by the end of the Project. Increasing the

7 human capital of children from the poorest Salvadoran households will enhance their ability to participate in and benefit from future socio-economic progress (as youth and adults), thus helping to reduce the inter-generational transfer ofpoverty.

To achieve its development objective, the Project will support the GOES in realizing several key intermediate outcomes, specifically: (i)implementing and scaling-up a conditional cash transfer (CCT) program targeted to families living in extreme poverty in the country’s 100 poorest municipalities; (ii)extending provision and improving the quality of a essential health services package and nutrition services in these municipalities; (iii)ensuring that poor Salvadorans living in the targeted municipalities have legal access to services, by making sure that they possess the requisite legal documentation, such as birth certificates and/or official identification cards; and (iv) strengthening the capacity of the Salvadoran institutions charged with implementing the CCT program in the context ofthe Red Solidaria Program.

3. Project components

The Project is comprised of 4 components that will support implementation of the Salvadoran Government’s Red Solidaria Program, as noted above. The first component involves the establishment and implementation of a conditional cash transfer (CCT) program, to support additional investment in children’s education, health, and nutrition by El Salvador’s poorest households. This demand-side intervention will be complemented by a supply-side intervention, second component, to ensure the provision of a essential health services package and nutrition services in El Salvador’s 100 poorest municipalities. The third component of the Project focuses on improving legal access to services among the country’s poorest families by ensuring that both children and adults have the necessary legal documentation. Fourth component focuses on monitoring, supervision and evaluation of Project outcomes, including measures to assure effective management ofthe Government’s Red Solidaria Program.

As is discussed further in Section C., below, the Red Solidaria Program will have a three-tiered institutional structure that includes: (i)an overall policy tier; (ii)a coordination, supervision, and monitoring tier; and (iii)a program implementation tier. Within this framework, components 1-3 of the Project are focused on supporting the Program’s implementation tier - through the Social Fund for Local Development (FISDL), the Ministry of Health (MSPAS), and the National Registry (WN) for components 1,2, and 3, respectively. Component 4 supports the Program’s coordination, supervision, and monitoring tier, which functions reside in the Red Solidaria Unit ofthe Secretaria TCcnica de la Presidencia (STP).

The four components are described in detail in the paragraphs that follow.

The project’s support for the Red Solidaria program consists of four components:

Component I. Conditional Cash Transfer Program (US$63.6 million financed by government counterpart funds). This component would support the implementation of a conditional cash transfer program to encourage extremely poor families to send their children 5- 15 years old to pre-school and primary education, maintain the full immunization “package” in children younger than 5 years, and regularly monitor the growth and development of children

8 aged 0-24 months. The conditional cash transfers component constitutes the core element of the first phase of the Red Solidaria, and it will be implemented through the FISDL under the coordination and supervision of the STP, which is the chair of the Red Solidaria’s National Board (policy tier) and holds the executive direction of the program. Implementing the CCTs requires close coordination and active participation from the Ministries of Education and Health to ensure the timely delivery of quality services, essential for program impact and for families to comply with their co-responsibilities. The Ministries of Education and Health have participated fully in the design and preparation of Red Solidaria, and they have adjusted their sector development plans to match Red Solidaria’s goals and targets.

The component consists of three subcomponents which support these goals: (A) Conditional Transfers; (B) Support to Beneficiaries; and (C) Institutional Strengthening ofFISDL.

A. Conditional Transfers (US$51.4 million). This subcomponent would support and finance a CCT program for eligible families living in the rural areas of the poorest 100 municipalities and is expected to benefit up to 100,000 families and roughly 300,000 children over the life of the project. Selected families will receive one or both transfers for up to three years. Families with children under 5 years of age only would be eligible for a health and nutrition transfer currently set at 15 dollars monthly regardless of the number of children. Families living in rural areas of the 100 poorest municipalities with children older than 5 and younger than 15 years of age only, attending primary school would be eligible for an education transfer of ten dollars, regardless of the number of children. Families that qualify for both types of transfer will receive two transfers of 10 dollars each in only one payment. In all cases, transfers will be conditional on beneficiary compliance with specific co-responsibilities, which should be met independently.

Beneficiary families will receive the education transfer as long as all children older than 5 and younger than 15 (who have not already completed primary education) are enrolled in primary school and maintain a class attendance rate of 80 percenta6 The health and nutrition transfer would require that households fulfill the separate co-responsibilities, specifically that: (i)parents assure that all children under 5 are hlly immunized under the established health protocols; and (ii)that children under 5, as well as pregnant mothers, participate in regular health and nutrition monitoring, again according to the established health and nutrition protocol^.^ The program, through the support offered by the specialized NGOs, will also encourage mothers to participate in workshops and training programs to promote better childcare, home hygiene, healthy food preparation and consumption, and so on.

The value of the combined transfer per family is about 15-17 percent of the average income of rural households. This proportion is in the range of those used in most other successful CCT programs in the Latin America region - amounts that have been demonstrated to have a

This translates into no more than 4 days ofunjustified school absence per month. ’ In the case of health and nutrition, transfers to eligible families would be suspended either: (i)if a family were unsuccessful in fulfilling both co-responsibilities in the same month; or (ii)if a family were unsuccessful in fulfilling one of the two co-responsibilities over two consecutive health visit periods or three times over any twelve months period.

9 sufficient incentive for families to send their children to school and to regularly attend child growth monitoring sessions, yet sufficiently low to avoid distorting labor market decisions.

Targeting of beneficiary families will be based on the combination of two mechanisms: geographical targeting to identifying the poorest municipalities (100) and proxy means testing to select the poorest families (about 80,000). Two sets of municipalities were defined within the 100 targeted through the poverty map: 32 municipalities characterized as severe extremely poor municipalities (Le., the poorest of the poor) and 68 municipalities considered as high extremely poor municipalities. In the 32 municipalities, given their high poverty incidence (on average around 75 percent including urban areas) all rural families with children younger than 15 years of age will be eligible for the conditional cash transfer program. The selection of families in the remaining 68 municipalities where poverty incidence is lower (on average about 60 percent) will follow the results of a proxy means test developed and tested during project preparation and financed under the PHRD grant.

To improve transparency and guarantee the timely delivery of the benefit to beneficiaries, transfer payments will be made through the Salvadoran banking system. A recent assessment of available banking services in the targeted area showed that it is very likely that the program will need to use the services of several banking institutions to cover all municipalities and communities. It may increase the administrative cost of the subcomponent (to up to 2 percent) and require from the FISDL additional control and payment authorization to disburse transfers to families.

Given the administrative complexity of CCTs, the program will be scaled up gradually, in two phases. By the end of 2006 (first year of project implementation) the program will cover the poorest 32 municipalities of the 100 municipalities in the target group. It is expected that families from the 15 poorest municipalities (about 20,000) will be registered in the program by the end of 2005. It is estimated that up to 40,000 families will receive benefits in the first phase. From 2007 on, the program will incorporate about 60,000 additional families residing in the remaining 68 municipalities (see table A.4.1). In order to guarantee the future sustainability of the program, transfers to families would be financed with government counterpart funds only, administered by FISDL under the general coordination ofthe STP.

B. Support to Beneficia y families (US$5.2 million)). This subcomponent will finance activities to help beneficiary families to participate in and obtain the maximum benefit from the CCT program. This support will be provided by NGOs specializing in community development, in close coordination with social service providers (e.g., health, education) at the local level. FISDL will serve as the contracting agency for the NGOs.

As part ofthe support to beneficiary families, the NGOs will: (i)assist families in understanding Program objectives and regulations; (ii)support families in more remote communities to obtain their transfers; (iii)help families to understand and fulfill their co-responsibilities, including identiffing barriers to compliance and supporting beneficiary families in overcoming them; and (iii)provide training and workshops in several substantive areas related to the CCT, such as on preventative health and nutrition, the value ofregular school attendance, the costs of child labor,

10 and on social audit of basic services. Trainings and workshops will be planned and offered in coordination with social service providers in education and health.

Selected NGOs will support the FISDL with the program implementation process at the local level through:

0 organizing community assemblies to validate information entered in the registry of beneficiaries (padron de beneJiciarios), sign the agreements of co-responsibilities between families and FISDL, formally incorporate families in the Red Solidaria, and identifying madres titulares, mothers who will sign the Program co-responsibility agreements, claim the bimonthly payments, attend the regular workshops, etc.; 0 helping to establish Red Solidaria community committees to ensure adequate communication between beneficiary families, their communities, and the Program, including the channeling ofrequests and/or grievances and facilitation ofthe social audit process; and 0 ensuring that relevant family information is up-to-date in the Red Solidaria information system.

C. Institutional Strengthening of FISDL (US$7.0 million). This subcomponent would strengthen the capacity of FISDL to: (i)manage the conditional cash transfers, (ii)manage the resources for Project components 3 and 4; and (iii)manage the infrastructure subprojects that will complement the work of this Project (and that will be financed by the IDB). The FISDL will operate under the general coordination and supervision of the STP which, itself, is engaged in efforts to strengthen its capacity for coordination, supervision, and monitoring (efforts that will be continued under component 4 of the Project). This subcomponent will include technical support, training, development of information systems and equipment. The design of the abovementioned systems is being implemented as part ofproject preparation and financed by the PHRD grant as well as IDB technical assistance.

Proper management of the CCTs is critical to program success. The Project will support FISDL’s capacity to manage the transfers by strengthening the institutional framework and operational capacity of FISDL, including internal norms and regulations, operational guidelines, and coordination mechanisms. It will also strengthen the technical capacity of FISDL by creating and consolidating within its administrative structure the following tools for CCT management: (i)a system for targeting Red Solidaria beneficiaries, based on both an updated poverty map and a proxy means test mechanism; (ii)a beneficiary registry to include families selected to receive direct transfers; (iii)a monitoring system for verifying compliance of co- responsibilities, controlling payments to beneficiary families, and generating managerial reports and progress indicators; (iv) a system to track the project’s physical and financial progress during implementation, (v) a process evaluation system to monitor the operational processes of the CCTs and introduce timely adjustments to fine-tune implementation, and (vi) an ongoing system of spot checks of Project operations to validate the data collected for the Project, in particular regarding compliance with co-responsibilities, and the efficiency of operational systems. Given the importance of ensuring that these tools are in place prior to the start of the conditional cash transfers distribution, the systems’ design and initial implementation are being financed by both the PHRD grant and an IDB technical assistance grant.

11 The institutional strengthening efforts of the FISDL for CCT implementation have already led to improved coordination between the FISDL and the STP (Le., between the coordination and implementation tiers) as well as between the FISDL and the other implementing agencies, such as the Ministries of Education and Health and the Civil Registry (RNPN). This process of institutional strengthening is critical, since the impact of the CCTs will depend on the adequacy and effectiveness of inter-agency coordination, both among the implementing agencies and across the different institutional tiers.

The main results indicators for Component 1 will be that: (i)80.000 extremely poor families receive regular conditional cash transfers; and (ii)85 percent of beneficiary families will meet their education and health co-responsibilities regularly.

Component 11. Expanding Provision of Basic Health and Nutrition Services ($15.0 million World Bank financing; $20 million total external financing). This component will support the expansion of the existing basic package of matemal and child health services, and the strengthening of nutritional interventions based on the AIN-C integrated community nutrition model in the 100 poorest municipalities where the conditional cash transfer program will be implemented. This component supports the MSPAS to expand coverage of a single package of basic health and nutrition services in the 100 municipalities of the Red Solidaria. To do this, it will complement the service provision supported by ongoing World Bank (RHESSA) and IDB (PAM) projects, and will close coverage gaps in those municipalities that are not served by the ongoing projects. Service provision will be contracted out to NGOs, and after December 2006, when the IDB’s PAM project ends, a single unit within the MSPAS will be responsible for the provision (through NGOs) ofthe service in the 100 municipalities.

The activities to be supported by this component include the provision of a single package of basic health and nutrition services and extending provision to reach universal coverage of the 100 targeted municipalities of Red Solidaria; implementing the basic package the AIN-C strategy; and strengthening the supervision scheme. The project would finance (i)contracting out ofthe service provision to NGOs to ensure universal coverage of a single package ofbasic health and nutrition services in the 100 Red Solidaria municipalities, and (ii)activities to institutional strengthening MSPAS’s capacity to supervise NGOs. i) Ensuring provision of a single package of essential health and nutrition services.’ The main focus ofthis package is the provision ofmatemal and childcare services and constitutes the supply-side complement to the CCTs. The package includes the following intervention^:^ (i) matemal care, (ii)sexual and reproductive health, including family planning and the control of sexually transmitted diseases, (iii)child health (for children under 5 years), child nutrition and development; (iv) health education, detection and treatment ofthe most prevalent communicable diseases and (v) detection and referral of the most prevalent and non-communicable diseases in adults. In this framework, even though the main focus of the extension ofhealth services under

* The content of this package of essential health and nutrition services is aligned with the Basic Package of Health Services agreed upon under the WB RHESSA project, to ensure coherence in service delivery. See Earthquake Emergency Reconstruction and Health Service Extension Project, Project Appraisal Document (Report NO. 22626- ES), October 31,2001. If necessary, the Ministry of Health will complement the financing of other health activities in order to ensure provision ofa complete package ofservices.

12 this project is on maternal and child health, the package will finance other health activities, consistent to those currently provided through ongoing operations".

Services will be provided by NGOs contracted by the MSPAS. The NGOs will provide services through at least: (a) a mobile team composed by a doctor, a nurse andor an auxiliary nurse. This team will visit the communities at least once a month; (b) a support team composed at least by a nutritionist and a public health expert/ project coordinator; (c) a local health worker (promotor de salud), based in the communities. The promotor de salud will visit each family within the community periodically in order to identify major health risks at the community level.

In addition, the essential health services package and nutrition services will be strengthened to fully incorporate the AIN-C model. The strategy is based on community volunteers (consejeras voluntarias) who monitor the growth ofchildren under two years old, counsel mothers on proper care for their babies and toddlers, and advise and monitor pregnant and lactating women. The rural mobile team of the MSPAS will provide support and supervision to the consejeras voluntarias and provide preventive and curative primary health care services to children under age five. In those municipalities currently supported by the RHESSA project, the RHESSA project will finance the implementation ofthe AIN-C strategy through the same NGOS" that are providing the essential health package. ii) Strengthening MSPAS's supervision capacity. The project will strengthen the SIBASI's capacity to supervise the NGOs. To do so, the project will finance consultancies. Complementary technical assistance, training, the purchase of IT, transport equipment and mobilization operating costs will be financed by the RHESSA project and/or MSPAS budget. The supervision manual will define more precisely the financing needs of each SIBASI in order to strengthen supervision.

The main results indicator for Component 2 will be that: 100 percent of villages (cantones) within the target areas will be covered with the essential health services package and nutritional services by the third year ofProject implementation.

Component 111. Strengthening Legal Access to Services through Expanding the Civil Registry (US$4.0 million). This component will support the National Civil Registry (RNPN) in expanding legal access to basic education and health services in the 100 municipalities targeted under the Red Solidaria by ensuring that families and individuals that lacking proper legal status are able to obtain the appropriate legal documentation. Specifically, this component will focus on ensuring that all members of eligible families, including those older than age 15, are incorporated in the national civil registry system and possess the personal identification documents to gain access to basic public services - either in the form of a national Identity Document (Documento Unico de Identidad - DUI) or a birth certificates (for minors under 18 years of age).

loA more detailed description of interventions included in the health care package is presented in Annex 4 " In the Paracentral region the RHESSA project is expanding the coverage of health and nutrition services through strengthening the institutional capacity ofthe Ministry of Health.

13 This component will involve collection of data on families in the 100 municipalities targeted by the Project, as part of the census being collected by FISDL to register the Red Solidaria’s beneficiary population. The RNPN will use this census to identify the part of the population without proper documentation and those requiring verification, correction, or updating of their identity documents. On the basis of the census, the RNPN will identify three groups requiring action: (i)children younger than 18 years old without birth certificate, (ii)adults older than 18 years of age with birth certificate but not DUI, and (iii)adults older than 18 years old with neither birth certificate nor DUI. Every family will be notified by the RNPN regarding the status oftheir members, as well as ofthe processes required to obtain proper legal identification. DUI Centers (associated with the RNPN) will then process the necessary identity documents. To facilitate the process, the RNPN will establish mobile DUI Centers, where required, to ensure that those in the most remote rural areas are able to obtain the identity documents.

The main results indicators for Component 3 will be that: (i)90 percent of children younger than 18 years ofage living in the Project’s target areas have received their birth certificate; and (ii)90 percent of family members 18 years of age or older in the target areas have received legal identification documents.

Component IV. Monitoring, Evaluation and Social Awareness Strategy (US$2.0 million World Bank financing, $6.0 million total external financing). The Project also will support the implementation of the Red Solidaria Program through the establishment and strengthening of an appropriate institutional structure. In this context, the Project will support the strengthening of the Secretaria TCcnica de la Presidencia (STP) - to ensure the adequate design and implementation ofthe operational rules and norms ofthe Red Solidaria Program, effective inter- institutional and inter-sectoral coordination, an effective social communication and dissemination strategy, and appropriate supervision and monitoring of the Program. As the current Red Solidaria Program constitutes the first phase in what will eventually be a broader social protection strategy, it will be important as well to continue to strengthen the STP’s capacity to undertake strategic as well as operational planning.

0 A social communication strategy aimed at the beneficiary population, basic service providers and other stakeholders, consisting of basic information to be disseminated about the Program, as well as national and local level workshops for the technical and administrative staff of the various ministries, agencies, municipal and local committees and NGOs carrying out activities under the Red Solidaria. An information system linked to the M&E system being developed and administered by the FISDL to enable follow-up on the program’s progress during implementation.

14 The Census of the potential beneficiary families ofthe Conditional Cash Transfer Program, The database will be collected following a methodology developed by FISDL and acceptable to both Banks. An external impact evaluation to measure the effects of the program (both demand and supply-side interventions) on school enrollment and attendance, nutrition, immunization, and utilization of health facilities. The evaluation, which will be contracted out with a highly specialized firm, will use a baseline developed for that purpose, along with follow-up surveys. Regular Program audits. On a four-monthly basis, e,ach executing entity will prepare and submit to the WB and IDB a financial monitoring report (FMR) containing: (i)a statement of sources and uses of funds and cash balances (with expenditures classified by subcomponent); (ii)a statement of budget execution per subcomponent (with expenditures classified by the major budgetary accounts); (iii)a physical progress report; and (iv) a procurement monitoring report. While based on WB’s FMR Guidelines, the FMR format will be flexible enough to satisfy needs of the Government, WB and IDB. The FMRs will be submitted not later than 45 days after the end ofeach four-month period.

On an annual basis, each executing entity will prepare project financial statements including cumulative figures, for the year and as of the end of that year, of the financial statements cited in the previous paragraph. The financial statements will also include additional information as required under IDB Audit Policy and WB Audit Guidelines (e.g., explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard (IPSAS), and each executing entity’s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement). These financial statements, once audited, will be submitted to the WB and IDB not later than 120 days after the end of the Government’s fiscal year (which equals the calendar year).

The supporting documentation of the four-monthly and annual financial statements will be maintained in each executing entity’s premises, and made easily accessible to WB and IDB supervision missions and external auditors.

These instruments will enable the STP to track the Red Solidaria program and to identify options to improve implementation and advance to subsequent phases of the program. This component will be fully financed by the IDB and the Bank through a parallel funding mechanism administered by the FISDL and implemented under a formal agreement between the STP and FISDL. Strengthening ofthe STP would be measured by two key results indicators, expected by the third year of implementation reflecting their ability to implement and coordinate. These are: (i)80,000 families included in the registry of beneficiaries by the third year, and (ii)100 municipalities with adequate provision of education, health and nutrition services.

Components financed by the IDB. The Project will benefit from two additional components financed exclusively by the IDB: (i)to ensure adequate supply in pre-school and primary education, the IDB is currently preparing an investment project to be presented to the IDB Board prior to this Project. The IDB project will finance activities to improve education quality, with

15 special emphasis on the 100 municipalities targeted by the Red Solidaria Program. (ii)As a component of the Red Solidaria program, the IDB will finance a basic infrastructure component to ensure that education and health facilities within the Red Solidaria are physically adequate and accessible; this component will finance investments in water supply, small roads and bridges, and electricity, among others.

4. Lessons learned and reflected in the project design

The recent Poverty Assessment (PA) for El Salvador showed that the poorest Salvadorans have not been able to take advantage of recent economic progress due in part to their lack of human capital. Moreover, the PA plus other related studies show that poverty goes beyond low income and lack ofbasic needs, to include barriers to basic services, including supply side barriers (lack of available services), demand side barriers (high direct and opportunity costs of using basic services), legal barriers (lack of legal identification documents needed for service access), and physical barriers to access (lack of basic roads and small bridges, basic social service units without adequate water supply and electricity, etc.). The Project will help the poor overcome barriers to building their human capital via an integrated approach that goes beyond traditional line ministry programs. The project supports cross-sectoral institutional implementation, through the existing network of central government, local authorities, civil society and non-public organizations.

The main lessons learned from programs in the region and elsewhere and reflected in project design include:

The Project design is based on the proven effectiveness of cash transfers to overcome shortcomings that traditional “aid programs” have not been able to solve. Recent impact evaluations of other CCTs programs in Latin America have shown that demand subsidies via cash or voucher transfer programs can improve school attendance and the regular monitoring ofchild growth and development, as well as health and nutrition outcomes. Conditioning the transfers on compliance with beneficiary co-responsibilities, when supported by training in key areas, also creates more favorable conditions for overcoming extreme poverty.

Preventing chronic malnutrition through food distribution and curative activities has not proven effective and may be counterproductive in the long-term. Food distribution and in- kind transfers have little impact in preventing chronic malnutrition since these efforts are targeted to children older than two years of age when the damage of malnutrition is already irreversible. The Project’s approach is largely (although not exclusively) preventive, based on growth monitoring and training, to promote long-term changes in family and community behaviors in nutrition and health.

Demand-side interventions for human development are more likely to be effective when supply-side constraints are addressed simultaneously. International experience indicates that although social protection programs like CCT can improve school attendance, reduce repetition and drop out, and mitigate chronic malnutrition, such programs can only attain their goals if poor households also have access to adequate education and health services.

16 Increased knowledge, improved awareness of the value of investing in children’s human capital, and strengthening of family health and nutritional practices - supported by training, workshops and Program co-responsibilities - are all important to the long-term success of a CCT program. Although the transfers are only scheduled to last for three years, if the Program succeeds in changing families’ knowledge, attitudes, and practices, then many of the benefits of the transfers will be sustained. Changing family practices in areas like water usage, food consumption, cooking practices, and child care, as well as recognizing the importance of education, full immunization, and regular child growth monitoring are all central goals of the Red Solidaria. The program incorporates complementary activities to support changes in knowledge, attitudes, and practices among poor families through (i) regular workshops offered by contracted NGOs to support families in meeting their co- responsibilities, and (ii)individual counseling and group training through the AIN-C strategy included in the essential health services packagehutrition services.

0 Any temporary benefit, such as a conditional cash transfer, must define a clear exit policy. Without a clear exit policy, a CCT program risks creating aid dependency and limts the ability ofthe program to address the needs of a wider group ofpoor households. This Project will incorporate an exit policy that seeks to replace the benefit, while continuing to support the desired family practices and human capital investments; proposals discussed with the GOES include: (i)education scholarships for families who received the transfer; (ii) incentives for teachers to stay in rural areas permanently and ensure that adequate education supply reach poor isolated communities; and (iii)community-based programs in health and nutrition that create a permanent demand for these services, like NGO provision of the essential health services package.

0 The importance of strong project leadership is recognized in this Project, as is the need for strong cross-sectoral support and coordination. Project coordination, supervision, and monitoring will reside with STP, a strong agency with the highest level of political support. Indeed, over the past year, the STP has effectively led a process to design and prepare the Red Solidaria program, while generating widespread interest and stakeholder support for the initiative. As the Program moves into implementation, the coordination, supervision, and monitoring roles ofthe STP will be greatly facilitated by the Red Solidaria’s National Board, comprised of representatives from the key sectors, ministries, and agencies involved in the Program’s implementation. Similarly, implementation of the CCT is being spearheaded by the FISDL, an agency with a history of leadership and effective implementation of development projects at the local level. In this context, both the specific agencies entrusted with key leadership roles in the Red Solidaria and the three-tiered institutional structure of the program (discussed in more detail below), with its strong multi-sectoral linkages, will serve the Program well.

5. Alternatives considered and reasons for rejection

Alternative development interventions and approaches that have been considered include:

0 Investment (SIL) vs. Programmatic (APL) or Learning and Innovation (LIL) Operations. Lending instruments such as a LIL and an APL were considered but eventually

17 disregarded. Despite a learning focus ofthe project, a LIL was not considered an appropriate instrument because of its small size and limited potential impact. An APL was not deemed appropriate at this time due to the innovative nature ofthis operation. While both an APL and a SIL foster a close Bank-Government partnership to accompany project implementation, the former is more suitable for an operation where there is a clear institutional structure already in place. A SIL is preferable because it allows the Project to combine an emphasis on building the institutional structure for the social protection strategy, with specific interventions (in this case the first phase of the Red Solidaria grounded in a conditional cash transfer program) to assist the poorest families.

0 In-kind vs. demand side transfers. Given recent program experience, the task team concluded that a CCT program is better suited to the objectives to strengthen basic service provision to the extreme poor, and, at the same time, improve their ability to participate in and benefit from future socio-economic progress. Specifically, CCT programs allow families to allocate additional funds according to their particular needs, without distorting family consumption. Conditional transfers were selected as the best way to sustainable improve living conditions for poor families. In addition, since in-kind transfers entail higher administrative, transaction and distributions costs, a larger proportion of total benefits actually reach the poor under conditional cash transfers.

0 Adopting an institutional-based approach vs. creating a separate project coordination unit. Achieving a development impact in each selected municipality will require coordinated actions to target and transfer resources to beneficiaries, and to ensure basic service availability. Meeting these objectives is unlikely unless implementing agencies, communities and beneficiaries are all involved in the process. It is not likely that a separate project coordination unit would be able to manage all of this alone; nor to promote sustainability of project actions. For this reason, the task team selected an institutional approach that involves all levels of implementation, including a community-based approach that includes NGOs as health and nutrition service providers and as providers of guidance and training to participating communities.

0 Line ministries as executing agencies. The STP, supported by the FISDL, is in a favorable position to manage the Project given its political clout within the government. A complex program that includes both demand and supply actions, requires centralized management at a high level of government that can exercise a coordinating role across all the executing agencies. This approach proved successful with PHRD grant implementation during project preparation.

0 Targeting mechanism. International experience with Conditional Cash Transfers indicates that careful targeting is necessary for full program impact on human development. The most appropriate targeting scheme is usually based on two stages: geographical targeting to identify the poorest areas of the country, and within selected areas, proxy means testing to select the poorest families. In El Salvador, a recent poverty map identified 32 extremely poor municipalities with an average poverty incidence over 80 percent. In those municipalities, only geographical targeting will be used as it is expected that the incidence ofrural poverty is even higher. In the remaining less poor 68 municipalities, a proxy means test will be used to select beneficiary families.

18 C. IMPLEMENTATION

1. Partnership arrangements

The Project will be formally co-financed by the World Bank and IDB. Some components (or subcomponents) will be co-financed by both Banks, while others will be financed independently, under close coordination between the two Banks. Project implementation will entail full operational coordination with IDB. Under the general coordination of the STP, single units in the MOH and FISDL will be responsible for Project administration, financial management, and procurement. Likewise, the Project involves the same M&E system, impact evaluation, and harmonized financial management procedures (ie., budget management and internal control procedures, financial reporting, and external audits) for both financiers. Finally, co-financing arrangements were also carefully agreed, The health and nutrition packages (component 2) will be co-financed by both banks using a pooled hnding mechanism and following Bank’s procurement norms and regulation. At the request of the GOES, activities under component 4 will be financed in parallel by both Banks. To ensure appropriate coordination and integration of Project components, project preparation has been joint with the IDB, including most missions.12

The Project also requires clear partnership arrangements with related education and health sector operations of both Banks. In the education sector, the task team has coordinated closely with the IDB team preparing a parallel operation to improve the quality and efficiency of pre-school and primary education, with special emphasis on the 100 poorest municipalities targeted within the Red S~lidaria.’~In the health sector, the World Bank and IDB closely coordinate their operations currently under implementation by the Ministry of Health: the Project’s health and nutrition component will be implemented under the same institutional arrangements as the World Bank’s RHESSA project, through the current PCU; and starting in 2007 when the IDB’s PAMproject ends, a single unit will be responsible for health and nutrition services in all the 100 municipalities under the Red Solidaria program. Moreover, as part of a long-term commitment to institutional development within the Health Ministry, the RHES SA project in engaged, in dialogue with the MOH on the eventual absorption of the PCU into the Ministry’s administrative structure.

The Project encourages active coordination with other donors, particularly KfW and USAID. As in other Central American countries, USAID has supported the design and implementation ofpreventive malnutrition programs. The Project is in coordination with USAID to ensure common goals for the health and nutrition component. KfW has supported the FISDL in development and utilizing an efficient resource allocation scheme for local infrastructure based on matching grants and participatory local processes. The infrastructure component ofthis

’* Note that the two project definitions differ slightly, since IDB would finance a Basic Infrastructure component not included in the World Bank Project and the World Bank would finance a Civil Registry component not included in the IDB Project. For more information on the IDB’s Basic Infrastructure component, see Annex 15. l3For hrther information on the IDB’s pre-school and primary education project, see Annex 16.

19 Project (financed solely by the IDB) will adopt these procedures, to be reflected in the pertinent sections ofthe Operational Manual.

2. Institutional and implementation arrangements

The Project will support the institutional and implementation arrangements of the Red Solidaria Program, to facilitate the execution of this innovative anti-poverty and social protection intervention. The Red Solidaria will have a three-tiered institutional structure that includes: (i)an overall policy tier; (ii)a coordination, supervision, and monitoring tier; and (iii) a program implementation tier. Specifically, the policy function will be carried out by a National Board composed of the relevant ministers and agency headsI4, and chaired by the Secretary of the STP. This Board will define overall policy and strategy, and it will broadly oversee implementation. Responsibility for general coordination, supervision, and monitoring and evaluation of the Program will be carried out by the Red Solidaria unit of the STP, while the FISDL, the Ministries ofEducation and Health, the RNPN (and other relevant agencie~’~)will be responsible for implementing the various interventions in coordination with local governments.

Under the general direction of the Red Solidaria’s National Board, the Project will be managed by an Executive Director - located administratively in the Red Solidaria unit of the STP - who will be responsible for the overall coordination of the Program and for ensuring its effective and timely implementation. The Project will support the STP’s leadership of the Red Solidaria by supporting the staffing and strengthening of the capacity of the Red Solidaria unit as well as through supporting the development of the tools necessary to coordinate, monitor, and evaluate the Program. The Executive Director of the Red Solidaria, who has already been appointed from within the ranks of the STP, will be supported by a small technical team which is in the process of being strengthened and expanded. The Red Solidaria unit will coordinate activities with all ministries and agencies involved in the program, and will manage the program’s monitoring system, the communication strategy, and the impact evaluation process. The functions ofthe STPIRed Solidaria unit will be supported by a Technical Committee of representatives from the Ministries ofHealth and Education, FISDL, RNPN, and other agencies involved in the implementation ofthe Program.

Under the general guidance of the STP, the FISDL will implement the CCT program. The FISDL is being restructured to conform to the component’s operational requirements, which include administering the targeting mechanisms, creating, managing and updating the beneficiary registry, verifying beneficiary compliance with co-responsibilities, and managing transfers disbursement to beneficiary families. The FISDL will also coordinate with the Ministries of Education and Health, and other implementing agencies to ensure the availability of basic services prior to transfers disbursements. At the same time, the FISDL will establish local committees to coordinate actions at the local level, act as liaison with municipal governments, and involve grass roots organizations. Following STP guidelines, the FISDL will be responsible

l4The Red Solidaria’s Board includes the Technical Secretariat of the Presidency, the President’s Advisor for Social Issues, the Ministries of Education, Finance, Health, Economy, Government (Interior), Public Works, Agriculture, Environment and Labor, FISDL, ANDA, RNPN, ISSS, and other central government agencies (Presidential Decree 11, 2005).

20 to contract specialized NGOs to provide support and training to communities and families at the local level.

Provision of basic health, nutrition, and education services will be the responsibility of the Health and Education ministries, respectively. Specifically, the Ministry of Health will implement Project Component 2. While the RHESSA project is currently managed by a PCU, as mentioned above, in the future MSPAS is planning to institutionalize those activities - through gradual absorption mechanisms - into its own administrative structure. l5 Consistent with this plan, the MSPAS will implement the extension of a unified package ofbasic health and nutrition services to those municipalities (among the 100 targeted municipalities) that are not currently covered by either the RHESSA or IDB’s PAMprojects .When the PAM project ends at the end of 2006, this unit will also guarantee basic health and nutrition service provision in those municipalities previously covered by the PAM. Of the 100 municipalities targeted in the Red Solidaria, the RHESSA project covers 68 municipalities and, the PAM 9, while 20 municipalities are not covered16. Implementation of the basic health and nutrition package in the 100 municipalities will be implemented under the timeline established by Red Solidaria (as presented in Annex 4, and 6, see tables A4.5 and A6.1).

The Component to Strengthen Legal Access to Services will be managed and implemented by the Civil Registry Agency (RNPN). The RNPN will implement the activities to provide personal identification documents for undocumented inhabitants of the 100 targeted municipalities, using mobile teams. These activities will be undertaken in coordination with the FISDL; for example data on the documentation status of family members in the Program area will be collected through a census to be implemented by FISDL to establish the Program’s beneficiary registry. Local-level institutions will also play an important role in the process. For instance, RNPN’s efforts to contact family members that require identification will be facilitated by municipal and local governments, as well as by the NGOs contracted by FISDL to support households’ in attaining the full benefits available under the Program.

To help reduce administrative costs and facilitate project activities, FISDL will be responsible for administering the funds for the Strengthening Legal Access to Services and Monitoring, Evaluation and Program Management components (Components 2 and 4, respectively). Given the strong administrative, financial management and procurement capacity of the FISDL, implementation of these relatively small components will be guided by inter- agency agreements between the FISDL and the RNPN, and the STP, respectively.

Basis for Selection of Institutional Arrangements The selected agencies are well positioned and capable of carrying out their roles. The STP, in its supervision, coordination, and monitoring capacity, will have ultimate responsibility for the Project’s implementation. To date, the Red Solidaria unit of the STP, working in coordination with the President’s Advisor for Social Issues, has been the Salvadoran government agency in charge of the basic design and formulation of the Red Solidaria Program. In this context, the STP has been responsible for: (i)defining an appropriate institutional and implementation strategy for the Red Solidaria (see figure 1 in annex 6); (ii)coordinating the Red Solidaria’s

’* The precise timeline for this institutional process has not yet been determined. i6 The Government will finance health coverage extension in 3 of the 32 poorest municipalities starting in 2006.

21 goals and activities with line Ministries, other central agencies, and municipalities; (iii)agreeing with the Ministry of Finance to guarantee the budget appropriation for the Project; and (iv) ensuring efficient donor coordination.

In pursing its role in the design of the Red Solidaria, and in coordinating the different actors in program preparation, the STP’s performance has been impressive. There has also been clear learning and capacity improvements during the course of the Program preparation. This capacity, coupled with the ability to grow and adapt to emerging needs and challenges will be key to the future success ofRed Solidaria. Moreover, the STP has enlisted the full support of the other institutional players - the various line Ministries and other implementing agencies. For all these reasons, the STP is the appropriate agency to coordinate and direct the Project.

The FISDL has also developed adequate administrative, financial management, and procurement capacity to implement component 1 - building on its recent experiences managing local development projects (see annexes 7 and 8). Indeed, in recent years, FISDL has played a role as project administrator, with support from such international agencies as the IDB and KfW, using similar institutional arrangements to those proposed with the RNPN and STP under components 3 and 4. Since FISDL, as a social fund, has demonstrated its capacity to work with the commercial banking system, that aspect of CCT implementation will not be new. Finally, FISDL is the Salvadoran agency with the most prominent institutional presence in the targeted municipalities. Nevertheless, like the STP, the FISDL will need to further strengthen its capacity as part of the Project. Processes are already underway. The current restructuring of FISDL to adapt its organizational structure to implement the CCT component, as well as to put in place the necessary systems to facilitate its new role, will contribute to ensure efficiency and transparency in implementation and to guarantee the timely delivery of transfers to the poorest Salvadoran families. This restructuring process commenced using PHRD grant funds and IDB technical assistance resources, and has progressed significantly. The process will be completed under implementation ofProject Component 1.

The Ministry of Health is the natural implementation agency for component 2. Since a necessary complement to a social protection strategy based on CCTs is the provision of an adequate supply of basic education, health and nutritional services, the Project will enable MSPAS to guarantee full coverage of the basic health and nutrition package in the poorest 100 municipalities. With the Project’s support, the MSPAS will also: (i)standardize the basic health and nutrition service package across the target municipalities; (ii)consolidate implementation of health and nutrition service provision through a single implementation unit; and (iii)strengthen MSPAS’s capacity to supervise health and nutritional services.

As in the case of health, the RNPN is the logical choice to implement a civil registry campaign. The National Registry of Natural Persons was created in 199517 as an autonomous central government agency in charge of register, maintain, and issue all information about judicial facts and acts of families This responsibility includes issuing personal identification documents, including the “Universal Identification Document” (DUI) and birth certificates. Given the significant proportion of Salvadorans without proper identification document - about 10 percent according to a study that the RNPN commissioned in 2003 - the RNPN has set out to

” The RNPN was created through the legislative decree number 552 of 1995.

22 update the national registry of citizens and close the gap of unidentified persons. Component 3 of the project not only seeks to improve legal access to basic services, but is also part of the RNPN strategy to reduce the proportion of Salvadorians without proper identification documents. Participation in the Red Solidaria is thus a natural poverty-focused extension of the work that the RNPN is already committed to and engaged in.

While the choices of institutional arrangements are appropriate - both in terms of the specific institutions and the three-tiered institutional structure - the fact that the Red Solidaria is a new initiative means that efforts to strengthen the institutional capacity of the main players will be important. As noted above, efforts have already begun to strengthen the capacity ofthe Red Solidaria Unit in the STP to coordinate, supervise, and monitor the Program. The Project will continue to support strengthening of this capacity, both through technical assistance and with support for adequate staffing. Similarly, efforts that began recently to restructure the FISDL and to build technical systems to support effective implementation of the CCT program - efforts that will be critical to the success ofthe Red Solidaria - will be continued under the implementation ofthe Project.

Financial Management arrangements. Project administration responsibilities will be assigned to two executing entities: the FISDL for components 1, 3, and 4, and the MSPAS for component 2. Within FISDL, the Financial and Administration Management Unit will be directly in charge of financial management (FM) matters. Within MSPAS, that role will be played by the Project Coordination Unit of the Reconstruction ofHospitals and Extension ofHealth Services Project (UCP-RHESSA).

The FM tasks will basically include: (i)budget formulation and monitoring; (ii)cash flow management (including processing loan withdrawal applications); (iii)maintenance of accounting records, (iv) preparation of in-year and year-end financial reports, (v) administration of underlying information systems, and (vi) arranging for execution of external audits. The fact that both entities have ongoing experience managing projects financed by the WB and IDB, for which they make use of suitable administrative structures and systems, puts these agencies in an advantageous position to take over, with relative ease, the cited FM functions. Still, certain project-specific actions to be executed by loan effectiveness have been identified in a FM Action Plan.

Annex 7 describes in detail the FM arrangements and the FM action plan.

Procurem en t Arrangements. FISDL will have full responsibility for the technical and fiduciary aspects for project components 1, 3 and 4, while. MSPAS will have full responsibility for the technical and fiduciary aspects for the project component 2. Overall coordination and supervision under the loan, as well as Project monitoring and evaluation will be the responsibility ofthe STP. At the same time, a number of ministries (e.g., health, education) and agencies (e.g., RNPN) will be involved in the implementation of the Project. Other institutional actors will also play a role in supporting implementation of the Project at the local level, including the municipalities, community associations, and NGOs.

23 There will be two procurement officers, one in FISDL and one in MSPAS. If necessary, procurement assistants will be hired to support this function. In the case of FISDL, the procurement function will be integrated within the organizational structure of FISDL. The project’s procurement officer will be integrated within the Institutional Procurement Unit (UACI). In the case of MSPAS, procurement activities will be carried out by the PCU implementing the Earthquake Emergency Reconstruction and Health Services Extension project 7084-ES, financed by the WB. That PCU will be strengthened with an additional procurement officer and an assistant if necessary.

A full assessment of the capacity of both FISDL and MSPAS to implement procurement was carried out. The review covered the organizational structure for implementing the project, the volume and complexity of procurement actions for the project as well as the agreed arrangements.

A project Operational Manual will include all rules and regulations for the implementation of each project component and operation of the two PCUs (i.e. project planning, monitoring, evaluation, institutional arrangements, reporting, communication, human resources, coordination, procurement, and financial management). Any changes to it will require no objection from the Bank. A complete version of the manual will be brought to negotiations for discussion and agreement with the Bank.

3. Monitoring and evaluation of outcomes/results

A comprehensive scheme will monitor and evaluate the Project and the Red Solidaria program. The system is based on four components:

(i)The Project’s Monitoring and Supervision system (M&S) established and administered by the FISDL and linked to Executive Direction of the Red Solidaria program in the STP, will be implemented to track the project’s physical and financial progress during implementation. The M&S will generate timely reports that will inform the Project’s implementing agencies in coordination with the STP. Additionally, the M&S system will track achievement of project performance indicators included in the Results Framework (Annex 3).

(ii)The Conditional Cash Transfers’ monitoring system at the FISDL will keep the program beneficiaries database updated, verify beneficiary compliance with agreed co-responsibilities of the CCT, control payments to families, and produce managerial reports and projects indicators. The system will receive data to verify compliance and on such basis delivery of the education and healthhutrition transfers from the contracted NGOs, collected directly from the education and health sectors’ information systems.

(iii)A spot-checks system, implemented by FISDL, will verify the quality of information feeding the monitoring system and the Project’s operational systems. Spot-checks will occur regularly (several times a year) on a sample basis.

24 (iv) The Project impact evaluation, coordinated by the STP and contracted to an external firm, will assess the impact of the CCT program on beneficiary families and on the related provision ofbasic services. This evaluation will also assess the impact ofthe CCT program on the demand for basic services. The impact evaluation will use a specific baseline, collected prior to project implementation, and follow-up household surveys ofcontrol and treatment groups.

(iv) Social audits are a participatory monitoring ofproject activities by beneficiary communities. The project, through municipal and local committees and in coordination with FISDL at the local level, will promote social audits. These NGOs will work with the municipal liaison (enlace municipal) and local authorities to coordinate the social audits and obtain beneficiary feedback and suggestions.

4. Sustainability

The Red Solidaria Program constitutes the most important social policy intervention of the Saca administration in El Salvador. Program development, led by the STP and the President’s advisor for social issues, has been a lengthy process, actively involving line ministries and other central government agencies (notably the FISDL) from the outset. Similarly good cooperation and coordination is expected for the implementation phase. This collaborative process has ensured that the Red Solidaria program reflects a shared vision of social policy outcomes, under a very coherent framework, in which key medium-term development goals for the social line ministries, the FISDL, and the RNPN have been adjusted to support a sustainable expansion of the Red Solidavia.

Equally important, the government of El Salvador as a whole has demonstrated very strong ownership of this Program. Indeed, the Program represents the Flagship poverty reduction and social protection program of the current government, launched at their own initiative. The high level of ownership and commitment has been evident over the project preparation process. A common concern for CCT programs is fiscal sustainability beyond the period of the donor- financed project. The Salvadoran government has decided to address that risk from the outset by financing 100 percent of the conditional cash transfers out of government revenues, as counterpart funds for the project. The loan agreement will include corresponding covenants to ensure annually that adequate fiscal space and budgetary appropriations are in place.

A key goal of CCT programs - and a key challenge - is to generate sustainable increases in families’ investments in human capital along with long-term improvements in families’ health and nutritional practices. International experience suggests that when a conditional transfer is phased out, there is some risk that enrollment and drop out rates may revert to their pre-program levels. The risk of a reversion appears to be lower in the case ofnutrition and health transfers, as new practices in these sectors are commonly supported by community-based strategies to generate and maintain demand. To address these risks and improve program sustainability, the GOES is considering interventions that could work to support continuity of gains. For example, to ensure that short-term gains from the education transfers are carried forward, the Ministry of Education (MoE) is considering a complementary scholarship program for children of families that consistently met their CCT co-responsibilities to ensure that they complete grade 6th. In

25 addition, the MoE is working to create a system of incentives for rural teachers (bono de rumlidad) that will induce them to stay at rural schools, thereby ensuring an adequate supply of education in remote, rural areas and motivating families to continue making investments in their children’s education.

To improve institutional sustainability, considerable resources will be allocated to consolidate supported activities within government institutional structures. A major Project focus is strengthening the STP’s capacity to coordinate a medium-term social protection strategy and make judgments regarding its expansion based on accurate information and program impact. Likewise, special attention will be focused on FISDL’s institutional framework to ensure adequate capacity to administer, implement, and monitor a social protection intervention based on conditional cash transfers. By the end ofthe Project it is expected that the FISDL will have the administrative structure, technological tools, and-more importantly-the knowledge to expand the program to other families and areas ofthe country.

The Project will support the GOES strategy to consolidate the role of the line Ministries as the leaders oftheir sector strategies and as directly responsible to improve service quality and extend coverage. To ensure sustainability of these improved and expanded services, and the increased service usage promoted by the CCTs, the GOES will need to develop fiscal provisions to ensure availability ofthe additional financial resources required on a continuing basis.

5. Critical risks and possible controversial aspects

The main possible risks are macro-level issues associated with this Project. The first concerns the fiscal space the government will need to create to accommodate the Project and to achieve the agreed goals. The second refers to the existing political situation in El Salvador and, specifically, the required debate and negotiation between the main political parties in El Salvador’s National Congress that could delay Project approval and effectiveness. Other potential risks refer to issues ofinter-agency coordination, adapting FISDL to take a leading role in project implementation, reducing gaps in basic services provision, increasing the government focus on the provision of community-based nutrition services, health and nutrition sector coherence, and administrative capacity. Most of these elements represent a shift in the way the government implements poverty alleviation programs, and as such they represent a challenge for successful project implementation. The overall risk for the project is rated as medium.

26 planned to be fully financed by loan proceeds. The govemment will need to Indeed, the broader Red Solidaria program, which this Project would S mobilize political support in all support, is part of the government’s flagship anti-poverty program, quarters to ensure a speedy so political support emanates from the highest levels of govemment. approval in Congress. Therefore, it is expected that the Govemment will work to reach the agreements necessary to gain political support in Congress. The govemment has decided to finance with counterpart funds 100 percent of the conditional cash transfers to beneficiary families, both to guarantee their fiscal sustainability, and to smooth discussion in Congress where the project needs approval to start implementation. The Government’s program and The program enjoys the strong leadership provided by the S the operation will require an President’s Advisor for Social Issues, the Technical Secretariat of unprecedented level of the Presidency, and the FISDL to ensure the required support and coordination across sectors over coordination at both the policy and implementation levels. an extended period of time, not Political coordination of the program already foreseen through the only across government is recently created Board that will guide Red Solidaria activities. institutions and agencies, but across levels of govemment and The administrative structure for Project implementation is based on a with NGO and private sector three-tiered coordination scheme, each one fulfilling specific actors; it will be critical that is functions with a clear champion and enough political and technical coordination capacity be capacity to coordinate line ministries and central govemment 1 institutionalized. agencies. Within this structure, the Project’s executive direction and its supporting team will be institutionalized in the STP, fully backed by the President’s Technical Secretary and Advisor for Social Issues. This will assure the Executive Direction enough leverage to coordinate activities. In addition, the Project will provide considerable support to design and implement coordination mechanisms. FISDL will take a leading role A thorough institutional appraisal of FISDL was carried out during M implementingthe Project (and the project preparation and the required adjustments and reforms of its wider solidarity program). This administrative and institutional structure to manage and monitor agency will need to reform and CCTs were identified and agreed. These reforms began with the update its structure and put in support of PHRD funds, and additional resources will be allocated place adequate procedures and once the Project is effective. processes to manage a different kind of project than those that it has carried out in the past. There is a shortage of primary Both ministries are well aware of this issue and have expressed their L health care and nutrition services support of the actions required. Regarding education, the IDB is and, to a lesser extent, primary preparing a parallel project that will address gaps in education education services in many of the service delivery in the poorest 100 municipalities. In addition, the municipalities that would Ministry of Education is participating in the Project by supporting participate in the project. cash transfer exit strategies. In the case of Health, there is an Addressing this shortage will agreement between IDB, the GOES and the Bank to unify the require strong support from both package of services and the implementation units within the MoH. ministries as well as a Both Ministers are members of the Red Solidaria’s Board. Both commitment of adequate Ministries have adjusted their structural sectoral strategies of budgetary resources. extending coverage and improving quality of services to provide services to the 100 targeted municipalities as a priority. The Ministry of Health (MSPAS), The AIN-C program will be adopted as the model for the supply of M and the GOES more generally, nutrition services. The Project will promote coordination between have historically had a limited FISDL and the Ministry of Health to ensure that the nutrition focus on community-based component of the health program is effectively strengthened and nutrition activities, now includes the most important elements of the AN-C program. In considered good practice. addition, contacts and exchanges with intemational experiences Traditional nutrition interventions where successful growth promotion activities have been focused on food aid. In contrast, implemented will be established. well-designed community-based

27 nutrition programs (like AIN-C) have been given small weight and never scaled-up. The health and nutrition The Ministry of Health is part of the National Board of the Red L component of the Project need to Solidaria and close coordination with the STP is being promoted. be fully coherent with the Bank’s The ministry has committed to give priority to the expansion of the existing health project (RHESSA). package of basic services in the poorest 100 municipalities. The RHESSA project suffered Moreover, the FISDL will undergo an institutional transformation several delays and may jeopardize that is intended to guarantee a better coordination with MSPAS to the proposed Project if its basic ensure that the activities of the RHESSA are well-integrated in the healthhutrition component is not design of the health and nutrition component of the Red Solidaria. implemented in a timely and Finally, the RHESSA project has made recent adjustments to the satisfactory manner. project implementation strategywhich have demonstrated to be effective in improving the pace of extension of coverage of essential health services in the North region.

Overall Risk

6. Loan conditions and covenants

Effectiveness Conditions a. The Borrower shall enter into the following Inter-Institutional agreements (IIAs): (i) FISDL and the Ministry ofHealth; (ii)FISDL and the Ministry ofEducation; (iii)FISDL and Secretaria Tecnica de la Presidencia (STP) and (iv) the Ministry of Finance and FISDL for the transferring of funds to FISDL. These IIAs which will be specified in a manner satisfactory to the Bank will be signed by the authorized representatives of each ofthe parties to the IIA, in accordance with Salvadoran law, as soon as external financing of the Red Solidaria Program is guaranteed via approval of the Loan by the Borrower’s National Assembly after formal signing ofthe Loan Agreement. b. The Operational Manual must be adopted by the Steering Committee ofthe Red Solidaria in a manner satisfactory to the Bank, specifically following recommendations agreed during negotiations included in the minutes of negotiations signed September 20, 2005, as soon as the IIAs have been formalized.

Disbursement Condition Prior to the disbursement of funds for Component 3, FISDL shall enter into an Inter-institutional Agreement with WN.

Dated Covenants No later than 18 months after the Effectiveness Date, the Ministry of Finance and MOH should submit to the Bank a financial and action plan geared to assuring the fiscal sustainability or the GOES’overall expansion of health and nutiition services coverage initiatives satisfactory to the Bank.

D. APPRAISAL SUMMARY 1. Economic and financial analyses This section summarizes the economic analysis carried out to identify, ex ante, the economic viability of the Red Solidaria Project in El Salvador. With strong benefits due to both increased access and improved quality of basic health, nutrition, and educational services, the benefits of

28 Red Solidaria are estimated to far exceed the costs, indicating that this is a sound economic investment on the part ofthe GOES, World Bank, and the IDB. This analysis concludes that, at a 10 percent discount rate, the benefits of the Project are expected outweigh the costs with a net present value (NPV) of about US$233 million and an intemal rate of return (IRR) of 29 percent in the base case scenario.

The analysis has attempted to provide conservative estimates of the economic returns. For example, only private benefits of improved education, health, and nutritional status - measured in terms of expected additional earning of direct Program beneficiaries - were estimated. As noted above, no attempts were made to quantify in monetary terms the benefits associated the immediate poverty and/or inequality impacts of the Program; nor were estimates made of the extensive social benefits associated with basic human capital investments, nor any general equilibrium effects (benefits) ofgreater human capital investments associated with higher future rates of economic growth. Nonetheless, the finding of positive (private) economic returns is robust to a variety of sensitivity analyses carried out.

The total (undiscounted) cost of the Project is estimated at US$166,800,000 (of which US$2.6 million is unallocated). The main investment of the Program, the conditional cash transfers, is expected to have a cost of $13.7 million in 2007 and 2008, equivalent to 0.1 percent ofthe GDP. The cost of the CCTs will be fully financed by the Government’s own-raised funds. The major recurrent costs generated by the Project are related to expenditures in health, which are estimated to reach $6.4 million in 2008. From 2007, FISDL will generate $1 million per year in recurrent costs, Therefore, from 2009 government will need to finance part ofthe recurrent costs generated by the Project ($0.5 million in 2009 and $1.7 million in 2010). When the Project finishes, it is estimated that the fiscal costs of investments will reach $7.4 million, from which $6.4 million will be expenditures required to finance the essential health services package.

The fiscal burden generated by the new Project is less than 0.1% of the GDP. Health investments are about 2.3 percent of the annual budget ofthe MSPAS, while FISDL recurrent costs are about 2.7 percent of its annual budget. The Government is committed to assuming all recurrent costs generated by the Project. In the case of health services, this process will be supported by the development of a comprehensive strategy for the entire profile of investments to extend basic health and institutional services throughout El Salvador.

Additional details ofthe economic and financial analyses are presented in Annex 9.

2. Technical

Conditional Cash Transfers An extensive body of analytical work and practical experience in Latin America, including in El Salvador, has shown that sustainable poverty reduction requires a multi-sectoral approach that involves both governmental and non-governmental actors in service delivery. In this context, conditional cash transfers programs have been found to be an effective demand-side intervention to build children’s human capital. By providing a cash transfer to poor households, CCTs help to address short-tenn issues of income poverty; by providing incentives

29 and support for families’ investments in their children’s education, health, and nutrition, CCTs support the development ofhuman capacity and future productivity, thus contributing to poverty reduction in the long-run as well.

Recent impact evaluations of CCT programs in Mexico, Nicaragua, Honduras, Brazil, and Colombia demonstrate that these programs, when properly designed and implemented are effective in improving the human capital of children in poor households. In terms of education, analysis of conditional cash transfer programs in Latin American shows that CCTs have had positive and significant impacts on school enrollment and attendance and have contributed to lower grade repetition and school dropout rates. Indeed, CCT programs have had positive and significant impacts on children’s total years of schooling as well as on the proportion of 14 year-olds graduating from primary school. Similar positive impacts have been found in terms of increased food consumption, improved child nutrition, and increased health service utilization among poor families. In Mexico, for example, the PROGRESA program has significantly reduced the probability of chronic malnutrition (stunting) in children under 3 years of age, while in Nicaragua, the Red de Protecci6n Social, has contributed to significantly higher child immunization rates (FPRI, 2004; Rawlings and Rubio, 2004).

Experience over the past decade in Latin America has shown that the success of CCTs depends largely on the existence of an adequate supply of educational, health, and nutritional services, as well as on other complementary interventions to address key barriers to service access faced by the poor. In other words, CCT programs (as demand-side interventions) need to be carefully coordinated with traditional line ministries programs to guarantee adequate supply and quality ofbasic education, health, and nutrition services. Indeed, the lack adequate supply led to delays in the implementation ofFamilias en Accion in Colombia and has severely undermined the impact of the PRAF program in Honduras. Similarly, experience suggests that other measures may also be necessary to maximize the efficacy of CCT programs. This may include investments in basic infrastructure (e.g., roads, brides, transport) to ensure greater physical accessibility of service facilities as well as measures to reduce legal impediments to service access (e.g., provision of formal identification or identity cards). In this context, the development of a successful conditional cash transfer program requires recognition of the multiple barriers the poor face in accessing basic services as well as the establishment of the institutional mechanisms (including provisions for close inter-institutional coordination) to address them.

From an operational perspective, it is important that specific institutional mechanisms are put in place to ensure that CCTs are able to meet their objectives. Indeed, from the program design perspective, there is need for: (i)an accurate targeting mechanism to guarantee that beneficiary selection processes reach the poorest eligible families; (ii)a relatively sophisticated information, monitoring, and evaluation system to ensure that program goals, in terms of increasing human capital investment of poor families, are achieved (this includes, for example, development ofa registqdbeneficiary database, verification ofhousehold co-responsibilities, and adequate control over disbursements of transfers to families); (iii)an accurate estimate of the amount to be transferred to each family, based on the eligibility criteria; (iv) clear, straightforward, and transparent co-responsibilities with clear (and enforced) links between families’ fulfillment of co-responsibilities and receipt of the transfer; and (v) strong institutional

30 mechanisms and capacity to support the multiplicity of administrative requirements for the program.

The Red Solidaria program, GOES’Smain poverty reduction and social protection strategy, has been designed from a multi-sectoral perspective, combining demand- and supply-side interventions and effectively involving line ministries in an integrated poverty reduction program. In this regard, the main element of the Red Solidaria, the conditional cash transfers program, has been conceived as an integral part of a larger strategy, along with measures to expand and improve services in education, health and nutrition, and interventions to facilitate access to services among the poorest through better legal security (identification) and critical infrastructure investments in poor areas.

Moreover, the main features of the CCT under the Red Solidaria are consistent with international best practice. This can be seen from the comparative data presented in Table 1, below. For example: (i)the defined targeting scheme is based on both geographic and and household-level targeting via a proxy means test (PMT); and (ii)the amount of the transfer is within the range of similar programs for which impact evaluations have shown positive impacts on education, health, and nutrition. As explained in greater detail in Annex 4, the size of the transfers to families are large enough to induce families to invest in the human capital of their children, but sufficiently low to avoid creating distortions in families’ labor market decisions. Transfers are linked to independent conditions, themselves related to school attendance and healthhtrition issues. Moreover, M&E for the program is built on a multi-tier strategy that includes a monitoring system to track financial and physical progress, a system to verify households’ compliance with program co-responsibilities, a an external impact evaluation, and regular external audits.

PRAF (Honduras) 4 No 5 1-0.3 I From39 to 51 Red Solidaria 15-17 1 Yes 1 Yes Difference (in percentage points) between treatment and control groups. After 7 years in program, except Colombia (after 2 years in program) Impact in 12 and 60 month olds after 2 years in program (IFS, 2005) Impact measured as proportion of increased food consumption after 2 years in rural (25) and urban (15) areas respectively (IFS, 2005) Source: IFPRI 2004, except data for Colombia (Change in value of food expenditure, stunting, and education) (Institute of Fiscal Studies, 2005).

In addition, the GOES has paid special attention to the issues of coordination as well as to the development of the institutional mechanisms necessary to implement the program

31 successfully. Specifically, there are efforts underway to establish a unit in charge ofthe overall program at the highest level of Government (i.e., within the Secretaria TCcnica de la Presidencia). At the same time, FISDL, an agency with extensive experience in implementing local programs is being re-configured to ensure proper management of the CCT component. To help ensure that the program takes into account operational lessons from other countries, the Bank, together with the IDB, has been supporting the Government in the overall design of the program as well as in the development of key instruments for implementation, such as the targeting mechanism and the program M&E system.

Community Based Growth Promotion Programs To confront chronic malnutrition in the poorest Salvadoran municipalities, the Red Solidaria is also working to strengthen its program of preventative nutritional care, as an integral part of its package of basic health and nutritional services. The strategy followed by MSPAS builds on community-based rowth promotion programs (known as AIN-C or Atencion Integral a la Niiiez - Comunitaria 15), which have proven to be very effective in reducing malnutrition in other countries within and outside Central America. The program has demonstrated very positive impacts on mothers’ knowledge, attitudes, and behavioral practices related to child nutrition, child rearing, and family demand for health care, as well well as on child nutritional status.’’

In the 199Os, it was increasingly recognized that the determinants of child malnutrition were multi-dimensional and multi-sectoral. Thanks in part to the work by Mosley and Chen2’ and by UNICEF,21 thinking about malnutrition also evolved from focusing on epidemiological and food security issues to a addressing public health and broader development challenges. Moreover, during the same period, the international community began to focus on community- based nutrition programs, commonly integrated with micronutrient supplementation, as the preferred model of nutritional intervention. Emerging intervention models also built on on-going research on how to improve child growth through counseling of mothers and on how empowering women could strengthen their abilities to address the needs of their children through their own means.22 They built, as well, on the positive experiences of large-scale programs such as the Iringa Project in Tanzania, the Indonesia Behavioral Change Program and the Tamil Nadu

“Integrated Care for Children” in English. World Bank (2005) Honduras Nutrition and Social Protection Project, Project Appraisal Document, Report No. 3 1828-HO. 2o In their analytical framework, Mosley and Chen (1984) identify five categories ofproximate determinants of child health and survival in developing countries: (i)maternal factors (age at childbearing, parity, and birth intervals, which are affected by reproductive practices); (ii)environmental contamination with infectious agents, which is influenced by hygienic practices; (iii)nutrient dejciency (calories, protein, and micronutrients, which are affected by feeding practices); (iv) injuries (accidents and intentional injuries, which are affected by care); (v) personal illness control (preventive measures and curative treatment, which are affected by health care practices).. 21 The UNICEF conceptual framework organizes the many factors contributing to undernutrition as “immediate”, “underlying”, or “basic” causes. According to the framework the two immediate causes of undernutrition are i) inadequate dietary intake, and ii)childhood disease. The underlying causes ofthese problems are: i)household food insecurity, ii) inadequate care of women and children, and iii) insufficient health services and an unhealthy environment. These factors are influenced by basic causes such as shortcomings in education, political and economic structures, and the availability and control ofresources. 22 Griffiths et al, 1980.

32 Project in India, that continue to serve as best practice examples ofhow nutritional issues can be addressed effectively.

In Central America, the AIN-C model was first developed in Honduras, with the support of USAID/BASICS. First launched in 1996 and building on international experience, the AIN-C further refined growth promotion practices by introducing innovations such as the concept of adequate weight gain, a well-developed set of tools for aid workers, and a structure job-based training program for community volunteers. The innovative strategy of the AIN-C focused on preventing mild and moderate malnutrition to ensure a greater impact on child survival, rather than concentrating solely on the treatment of severe malnutrition among children. In general, AIN-C’s growth promotion activities begin with monitoring the children’s growth to establish whether it is adequate or not. Growth monitoring is accompanied by individual counseling to mothers regarding maternal care, including the value of exclusive breastfeeding, appropriate complementary feeding, the management of basic disease, and the importance and linkages to basic health services. In some countries, programs also provide micronutrient supplementation.

The AIN-C component ofthe Red Solidaria program aims to build upon, strengthen, and extend the last 4 years ofexperience with the AIN-C in 14 administrative departments (and 27 SIBASIs) around the country. The component will also build on the lessons learned from recent intemational experience, both within and outside ofCentral America.

3. Fiduciary

Financial Management. The Bank has assessed the suitability of using the FISDL and UCP- RHESSA existing financial management systems and procedures for project implementation. While these systems and procedures are generally adequate, certain additional safeguards have been incorporated into project design, and a FM action plan has been agreed. Annex 7 describes in detail the FM arrangements and the FM action plan.

Procurement. FISDL and MoH as the executing agencies will be responsible for managing the fiduciary aspects ofthe proposed project components implemented by each of them through the Project Coordinating Units in each agency.

The Bank’s fiduciary team concluded that both FISDL and MoHhave the financial management and procurement capacity (experience and systems) to implement the project. It was found that FISDL has gained experience in implementing the infrastructure component of the Education reform Project, 4320-ES, financed by the WB. The PCU in MSPAS currently implementing the Earthquake Emergency Reconstruction and Health Services Extension project 7O84-ESyfinanced by the WB, also has gained the required experience in implementing procurement. The action plan proposed in the Bank team’s fiduciary assessment, especially with regards to staffing, will ensure that both agencies will meet the Bank’s minimum fiduciary requirements to manage the project activities.

33 4. Social

The project supports the Red Solidaria of El Salvador, a joint sectoral effort under the Ministry of the Presidency, and coordinated by FISDL. The target area of the Social Protection project includes the 100 poorest municipalities on the Poverty Map23 (FISDL-FLACSO, 2004), which are located mostly in rural areas. Poverty in El Salvador is qualified as mostly rural. Although only 41 percent of the population lives in rural areas, 61 percent of the people suffering from extreme poverty are concentrated in those areas. From the total of 262 municipalities, the 32 ‘severe extreme poor’ municipalities will be intervened in the first year of the project, followed by the other 68 in “extreme high” poverty conditions thereafter.

A Social Assessment was carried out by a local multi-disciplinary team accompanied by FISDL, MOH and MOE evaluation staff. The assessment has two parts: (a) a desk review of existing data; and (b) a country-wide Participatory Rural Appraisal (PRA) which includes a stakeholder and beneficiary consultation. The goal of the consultations is to assess the utilization (or lack of) PHChutrition, primary school or civil registry services and to assess the levels of participation of the community, civil society organizations, service providers and others. Drawing from lessons learned, the consultation team will propose a ‘Social Participation Strategy’ to ensure the inclusion of the vulnerable groups of the population (isolated families, Indigenous peoples, single parent-families, orphans, etc.) in the project. A sample of twenty-one communities was selected for the assessment from the 32 ‘severe extreme poor’ municipalities, some ofwhich are within the first batch of 15 municipalities to be intervened by the GOES. The sample includes six indigenous communities and eight communities where the AIN program is being implemented by different agencies with slightly different methodologies. The consultations were carried out with both current and potential stakeholders and beneficiaries. The Assessment analyzed: (a) the adequacy of the project design in terms ofthe mechanisms used to include the poorest and more isolated population, (b) stakeholders and beneficiaries’ perceptions on access and utilization of services in education, health (nutrition) and civil registry, (c) the opportunities (or lack of) presently offered to the more isolated communities to participatehenefit from services, and (d) the existing mechanisms of social control to ensure every child has access to a school and has updated health records, and all pregnant and breastfeeding women have access to pre- and postnatal care. For each component, the assessment provided recommendations on how to improve the mechanisms to reach the more isolated and most deprived groups ofthe population, including indigenous groups.

According to the National Salvadoran Indigenous Coordination Council (CCNIS) and CONCULTURA (National Council for Art and Culture at MOE), less than 10 percent of the Salvadoran population are indigenous or self-identify as being of indigenous descent. As part of the assessment, a mapping exercise ofthe 66 municipalities with indigenous population (Source: Indigenous Profile, World Bank, 2003) and the 100 municipalities targeted by the project indicated that a total of 25 municipalities with indigenous peoples will be targeted by this Project. Given the presence of indigenous in the Project area, the OD 4.20 on Indigenous Peoples is triggered, and an Indigenous Peoples Development Plan (IPDP) is being incorporated as part of the Social Participation Strategy for the Project to ensure all vulnerable groups are covered in a culturally-adequate manner.

23 According to the integrated index ofmunicipal marginalization (IIMM).

34 5. Environment N.A.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [XI [I Forests (OP/BP 4.36) [I [XI Safety ofDams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

7. Policy Exceptions and Readiness

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

35 Annex 1: Country and Sector or Program Background EL SALVADOR: Social Protection project

El Salvador experienced a major political, economic and social transition during the 1990s. The civil war of the 1980s came to end in 1991, and since that time, regular, broad-based elections - most recently in March, 2004 - have helped lay the foundations for a stable democracy. A process of structural reforms implemented during the 1990s also transformed the Salvadoran economy by liberalizing trade, strengthening the private sector, privatizing several state enterprises, and introducing improvements in the competitiveness environment for private investment. Stable macro policies, coupled with these structural reforms, paved the way for the Monetary Integration Law approved in 2000 that established the base for the dollarization ofthe economy, and for El Salvador's participation in the Central America Free Trade Agreement (CAFTA), signed in late 2003. El Salvador has registered a number of important socio-economic gains in the decade-plus since the return to peace. The economy grew by an impressive 6 percent per year from 1990- 1995 and, then, by an average rate of2.8 percent from 1996-2002. Moreover, economic growth, coupled with reforms in some key social sectors and increases in social spending in the second half of the decade, has contributed to substantial reductions in poverty and improvements in basic socio-economic indicators over the period (Annex Table Al.1). Indeed, the poverty headcount has fallen by more than one-third; education levels have risen; access to basic services, such as safe water, has increased; and basic health and nutrition outcomes, such as life expectancy, infant and child mortality, and child nutrition have all improved. In several areas, including in basic education, infant mortality, and access to potable water, the gaps between the poor and the non-poor have also declined over the period. Notwithstanding recent progress, El Salvador faces important challenges moving forward. Slower growth since the mid-1990s has meant that average per capita incomes have barely grown over the last several years, observably slowing poverty reduction and socio-economic progress since 2000. Efforts to reinvigorate economic growth have been complicated by several external factors, including two powerful earthquakes. And despite important gains, a number of key social indicators in El Salvador - e.g., education, access to safe water - are still below the average for the Latin America region and for Lower Middle Income Countries. Moreover, while gaps between the poor (overall) and non-poor have declined recently in basic education, infant mortality, and access to potable water, basic social indicators among the poor continue to lag behind those of the non-poor. The recent World Bank Poverty Assessment for El Salvador (2004) found the following.

In education:

0 in 2002, twenty-two percent of 7-15 year-olds from the poorest families were either not in school or in a lower-than expected grade for their age; more than twice the level among children in the upper two quintiles;

0 less than half the children from poor households that do enroll in school complete 6th grade, while less than 25 percent complete the 3rd cycle ofprimary; this compares to between more than 80 and 70 percent, respectively among the wealthiest 40 percent ofthe population; and

36 0 only about 20 percent of poor children continue on to secondary school, compared to 36 percent among the non-poor.

ANNEX TABLE A1.1: KEY SOCIO-ECONOMIC INDICATORS IN EL SALVADOR: EARLY 1990s-EARLY2000s'

I Indicator i 1990-93 1 2000-02 I Change ~ GDP per capita, 1990-2002 (1995 1,376 1,763 28% increase Constant US S)

Poverty Headcount, 1990/9 1-2002 66% (DIGESTYC) 43% (DIGESTYC) 35% decline (Total, %) 64% (WB) 37% (WB) 42% decline

Poverty Headcount, 1990/91-2002 33% (DIGESTYC) 19% (DIGESTYC) 42% decline (Extreme, %) 31% (WB) 15% (WB) 5 1% decline

Net Basic Enrollment Rate, 1990/9 1- 74% 85% 15% increase 2002, EHPM (%)

Net Secondary Enrollment Rate, 19% 30% 6 1YO increase 1990/91-2002, EHPM (%)

Life Expectancy, 1990-2002 (years at 7% increase birth) 70 I 1 Infant Mortality Rate (deaths per 1,000 41 (FESAL 1993) 25 (FESAL 2002) 39% decline live births) 46 (WDI 1990) 33 (WDI 2002) 32% decline

Under-5 Mortality Rate (deaths per 52 (FESAL 1993) 3 1 (FESAL 2002) 40% decline 1,000 live births) 60 (WDI 1990) 39 (WDI 2002) 35% decline

Chronic Malnutrition (height for age, 23.3 19.6 16% decline children under 5), 1993-2002 (%)

Underweight Children (under age 5), 11 10 9% decline 1993-2002 (%)

Access to Safe Water, 1990-2002 (%) 66% 77% 17% increase

In health and nutrition:

0 infant mortality is almost twice as high among low-income families as among those with higher income levels;

0 chronic malnutrition levels are almost 40 percent higher among the poor than the national average;

0 over 15 percent of children of low-income families are underweight, while less than 4 percent ofchildren fiom wealthier households experience low weight-for-age; and

37 Salvadorans from the highest income households are more than one-third more likely to receive medical care when ill than those in the poorest quintiles.

Moreover, the extreme poor - roughly 15 percent of the population in 2002 - have not benefited proportionately from recent socio-economic progress and are, thus, at risk of falling even further behind. Since extreme poverty in El Salvador is disproportionately rural - nearly two-thirds ofthe extreme poor live in rural areas - those living in poor, remote rural areas are particularly at-ri~k.~~Indeed, additional analysis based on a new Poverty Map for El Salvador developed with World Bank support, shows that poverty has a strong spatial dimension, with extreme poverty rates being particularly high in the 100 poorest municipalities. In this context, a key finding of the Poverty Assessment was that many of the extreme poor have not been able to take advantage of recent socio-economic progress in El Salvador due to a weak human capital. The findings of the Poverty Assessment suggest that special measures - beyond the traditional programs of the education and health ministries - are warranted to strengthen the human capital of the poorest Salvadorans to ensure that they have the capacity to take advantage of future socio-economic progress. Indeed, the collection ofevidence highlights the value of developing a social safety net that can assure that the poorest families in El Salvador’s poorest municipalities have access to basic education, health, and nutritional services. Sector Issues Analysis of the relevant sectors highlights several key constraints faced by the poorest Salvadorans in terms of improving their access to basic educational, health, and nutritional services and strengthening their human capital. These factors are discussed in the section that follows. In essence, evidence from the education sector indicates that low household incomes and concerns about affordability (Le., “demand side” constraints) are the main barriers to attaining a basic education, not primarily the lack of the supply or provision of educational services. In health and nutrition, the evidence suggests a combination of demand and supply side factors are important. Many poor Salvadorans, especially those from remote rural areas, lack proper identification, which also creates legal impediments to basic service access. Moreover, until recently, El Salvador did not have a coherent or coordinated program of support to the poorest @e., safety net) that enabled to poorest families to overcome these barriers.

Education

Recent progress in raising education outcomes for the poor are very much connected to recent education reforms, which grew out of a broad-based consensus in the country. During the 1990s, the administration of the public education system was substantially decentralized. In the early 199Os, the Ministry of Education (MINED) established EDUCO, a community-based school program managed through community associations, ACEs, which has been the main instrument to expand pre-primary and basic education in rural areas. The ACEs have the responsibility for managing school resources including the hiring and firing ofteachers. In the mid-1990s the authorities began transferring the positive experience of the ACEs to the traditional system where School Councils (CDE) were created with the responsibility for: i)

24 Social Indicators are also correspondingly lower in rural areas. A recent study found, for example, that the prevalence of child mortality is 52 percent higher in rural areas than in urban areas (Fiedler 2004).

38 planning and implementing school activities; ii)managing the resources transferred to schools; and iii)raising additional funds to support school activities. Other instruments were developed at the school level to empower the schools, such as the Institutional Education Project (PEI), which sets forth the school’s medium term objectives and the associated Annual School Plan (PAE). Indeed, successive Governments in El Salvador have continued efforts to strengthen access and quality of basic education. In 2000, the new MINED authorities revised the progress made with the implementation of the Plan and prepared their strategic program - Education Challenges in the New Millennium, which details the challenges faced by education in each key area, the objectives to be accomplished and the strategic guidelines. The program’s principal objectives are to increase education quality, strengthen community participation, facilitate access to education and promote values and personal development. It details the programs, targets and financial requirements to achieve these objectives. Building on past achievements, the current Government has initiated in 2005 an updated education strategy, Plan 2021, which seeks to enhance access and increase efficiency ofbasic education, improve competitiveness through the educational process (e.g., increasing English teaching, strengthening post-basic education, research and technology), and improve management, monitoring and supervision. From the perspective of contributing to the human capita of the poor and, thus, to the nation’s poverty reduction efforts, Plan 202 1, focuses on increasing access among the poor, as well as improving the quality and relevance ofbasic education. El Salvador has also significantly increased its public spending on education since the start of the 19OOs, which has also contributed to improved outcomes. For example, the Government increased education sector spending from 1.9 percent ofGDP in 1992 to 2.3 percent in 1996 and to 3.2 percent in 2003 (World Bank 2004). Education’s share ofthe overall Central Government budget was also raised by over 7 percentage points in the second half ofthe 1990s - from 12.4 percent in 1996 to 19.5 percent in 2003. Public spending on basic education has also become increasingly pro-poor, also contributing to improved education access among the poor. Nonetheless, intemational comparisons indicate that public education spending is still low by intemational standards. As a percentage of GDP, El Salvador still remains near the bottom of a list of Latin American and Caribbean countries and well below the regional average; spending is also low relative to El Salvador’s per capita income level. Nonetheless, analysis of the education sector in El Salvador indicates that a large share of Salvadoran youth does not attend school because they cannot afford it (di Gropello 2004; World Bank 2004). Indeed, according to the 2002 National Household Survey (EHPM), when asked why they did not attend school, 40 percent of youth cited economic reasons - either that it was too expensive, that they had to work, or other reasons associated directly or indirectly with the affordability of schooling. Basic education in public schools is, in principle, free of charge. In practice, however, students have not only indirect costs, such as time that is not dedicated to work, but also direct costs with transportation, materials and contributions to the different school activities. Until recently, school directors frequently asked parents to contribute with a payment (cuotas) to help finance school spending. In other cases, parents would contribute to school maintenance, purchase of equipment or materials, or to finance extra-curricular activities. In some cases, parents even paid the salary of the teachers until MINED could assign teachers to the school. In late 2003, however, the National Assembly prohibited schools from asking

39 parents for cuotas and MINED began transferring additional resources to schools (bono de gratuidad) to compensate partly for this loss ofrevenue.

In contrast, school availability does not appear to be a major reason for not attending school: only 3% of the youth give as reason for not attending school that there is “no school nearby or no space available”. The percentage was somewhat higher in rural areas relative to urban areas (3.8 percent versus 1.8 percent). The percentage of youth at 3rd cycle (of basic education) age and at secondary school age giving this latter justification is lower than for the primary age group. This is surprising in view of apparent classroom constraints at these levels, particularly in peri-urban areas (di Gropello 2004); it may be that other reasons, such as the costs of schooling, overshadow the issue of school availability in the minds of children and their families. It should be noted that the unavailability of schools owing to the 2001 earthquakes is no longer a significant reason for children not attending school, as over 95 percent ofschools damaged by the earthquakes have now been reconstructed.

While El Salvador has implemented several programs to reduce the demand constraints to education, to date they have focused on secondary or higher education and not on ensuring that the poorest Salvadorans have access to schooling. Nonetheless, the evidence suggests that such measures hold significant potential to improve schooling outcomes among the poor in El Salvador.

Health and Nutrition

The health sector in El Salvador comprises the MSPAS, the Salvadoran Social Security Institute (ISSS), the military health facilities, the private sector and over 30 NGOs that provide mostly primary health care and nutrition services to populations with little access to private and public facilities. ISSS is financed by payroll taxes and caters to formal sector employees and their families, while MSPAS is financed from government general revenue and external loans and grants. It should be noted that fewer than 20 percent of Salvadorans have access to medical insurance. The ISSS covers 17 percent of the Salvadoran population; private and institutional insurance another 1.8 percent; and the remaining 8 1.3 percent has no insurance. The uninsured population is even higher among the poor - 90.9 percent among the moderate poor and 97.3 percent among the extreme poor. In this context, it is the responsibility ofMSPAS to cover the population without insurance, most particularly the poor.

Although total spending on health and nutrition in El Salvador is relatively high by Latin American standards this is largely attributable to high levels of private (household) spending. In 2000, El Salvador is estimated to have spent 8.8 percent of GDP on health, nearly 2 percentage points higher than the average for Latin America and the Caribbean (LAC) of 7 percent. About 57 percent of this spending (5.0 percent of GDP) came from private spending, however.25 When only public spending is considered, spending on health is much closer to regional norms - although per capita public spending on health is still considerably below the

*’World Development Indicators (2003). Note that MSPAS estimates for total health spending were somewhat lower, at 8.0 percent of GDP in 2001. Nonetheless, the split between public and private spending is consistent across the two sources.

40 LAC average.26 Ofthe approximately 3.8 percent ofGDP allocated to public spending on health roughly 1.6 percent has been allocated to the MSPAS budget in recent years. Within its budget envelope, more than half ofMSPAS resources have tended to go to hospital care - an average of 57 percent from 1996-2003 -while between 25-30 percent have been allocated to primary health care. This has had implications for the government’s ability to extend and provide quality health care services to the poor.

MSPAS has undertaken a number of actions in recent years to strengthen access to basic health and nutritional services among the poor. During the 1990~~for example, MSPAS sought to promote primary care and improve health and nutritional care services in rural areas by expanding infrastructure, hiring health promoters and training midwives. And while the bulk of public health resources have been historically directed to hospitals, efforts have been made in recent years to increase the share of the MSPAS budget allocated to primary health care. Between 1996 and 2003, for example, the share ofMSPAS’s budget going to primary health care did increase slightly, from 27 percent to 29.6 percent. Moreover, there is evidence that public spending on primary health care has been pro-poor in recent years. Some progress has thus been also made in improving health care services in rural areas, and this is reflected by improvements in several basic health and nutrition indicators.

The MSPAS Institutional Development Strategic Plan of October 2001 sought to address access and service quality by changing the organization and delivery of health and nutritional services. this has been done through: i)a community based approach to primary care provision, ii) development of a functional plan with guidelines for activities in health care facilities such as volume of procedures, equipment requirements, patient flows, service definition, numbers and categories ofpersonnel, and inter-hospital referrals, iii)establishment of closer ties between hospitals and primary care providers by decentralizin a subset of management functions, improving the referral system, and raising quality ofcare. 25

The cornerstone of the Plan was the establishment of Basic Systems of Integral Health Care (SIBASI) or health district units as the basic operative structure of the public system. Within the SIBASI area, a network of health providers and a general hospital work in a coordinated manner. The SIBASI health providers include NGOs, the ISSS, the MSPAS, the private sector and others. MSPAS has created 28 SIBASI. The Plan has also introduced a new model ofhealth service management in which the financing and the provision ofservices may be performed by different institutions. MSPAS will continue to have the responsibility for the financing, but the provision of services may be done by NGO and the private sector as well as through direct public sector provision.

Efforts continue under the current administration to strengthen basic access to health services by the poor. Indeed, the Government’s plan, Pais Seguro (2004-2009), calls for the reform ofthe health sector in a “concerted manner to develop an efficient national health system, functioning in a decentralized manner, with universal coverage and free of charge to all persons that can not afford basic services.” Current efforts are framed not only in terms of extending the

26 World Bank (2004). 2’ See Earthquake Emergency Reconstruction and Health Services Extension, Project Appraisal Report, World Bank, 2001.

41 supply and provision of basic health services to poor areas and to improve service quality, but to initiate actions to help strengthen demand among the poor for basic health services.

It is important to note that the donor community has played an important role in supporting recent health sector developments, including efforts to improve access to basic services for the poor. Since 2002, for example, USAID has been supporting the organization of seven SIBASI, which cover about 20 percent of El Salvador’s population. Similarly, the World Bank and the IDB are supporting health care coverage extension in different SIBASI. The World Bank Earthquake Emergency Reconstruction and Health Service Extension Project (RHESSA) has, for instance, been supporting the im lementation of a basic health and care and nutrition package in 99 municipalities (10 SIBASI)! In 73 of these municipalities - in the northern part of the country where MSPAS reach is limited - this is being done through the contracting ofNGOs to provide a basic package of services. The IDB project also covers 13 municipalities in the western part of the country and also supports NGO provision of a essential health services package and nutritional services.

Despite recent progress, El Salvador continues to face significant challenges in improving health and nutritional outcomes among the extreme poor. In contrast to the education sector, important constraints appear to exist both on the supply side (i.e,, continuing gaps in basic health service delivery and in quality of services, relatively weak clinical attention to chronic malnutrition) as well as the demand side (i.e., high levels ofout ofpocket expenses in the face of household income/financial constraints). Indeed, it has been estimated, that 24 percent of the population still do not have access to health services or only have limited access.29

On the supply side, recent analysis suggests that MSPAS providers are often considered to be of low quality, in part because of the low and irregular availability of and long waits for medi~ation.~’Indeed, when ill, 14 percent ofthe poor go to private or NGO facilities rather than to MSPAS facilities (World Bank 2004). Several factors appear to adversely affect service quality and, thus, people’s confidence in the public health system. This includes lack of sufficient and properly trained staff in public facilities which often rely on health service trainees ofvarious types. Compounding this problem is the fact that incentives for medical professionals to participate in the public system appear to be misaligned. Only half of the medical staff in public institutions is fully paid by MSPAS; moreover, key clinical personnel spend only about one-third to one-half oftheir time in non-clinical activitie~.~~

28 Efforts to improve access and service quality have been complicated by the earthquakes of 2001, which caused severe damages to the public health infrastructure. Two MSPAS hospitals were severely damaged and six others were partially damaged in the first quake, with as much as one-third of all MSPAS health facilities affected. Indeed, estimates suggest that as many as 40 percent ofMSPAS hospital beds were out of service in the wake ofthe second earthquake. The most badly damaged hospitals continued to operate under provisional structures, while the rest reduced their operations. Moreover, the government engaged in ongoing earthquake reconstruction efforts, supported by the IDB, the Central American Bank for Economic Integration (CABEI), Japan and the World Bank. Nonetheless, the effects of the earthquake still affect El Salvador’s ability to provide healthcare (see World Bank 2004). 29 Human Development Report 2003 (UNDP), cited in World Bank 2004. 30 See Earthquake Emergency Reconstruction and Health Service Extension Project, Project Appraisal Document (Report NO. 22626-ES), October 3 1,2001. 3’ Data extracted from “Baseline and Best Practices Assessment of seven SIBASI in El Salvador,” Eric Seiber, PHRPlus, December, 2002.

42 Moreover, efforts are needed to strengthen the Government of El Salvador’s outreach and model of service delivery model to address chronic malnutrition. MSPAS (and the GOES more generally, through the Secretaria Nacional de la Familia and other institutions) has historically had a limited focus on community-based nutrition activities, including through such programs as Atencidn Integral a la Niiiez - Comunitaria (AIN-C), which are now considered good practice internationally due to their focus, among other things, on child growth monitoring and control, training of mothers in good nutritional and health practices, and on simple yet sustainable changes in family and community behaviors. Instead, nutrition interventions have traditionally tended to focus on the distribution of food packets and food assistance. While the GOES does have some experience with implementing the AIN-C program in several municipalities, the MSPAS and GOES have yet to give this approach its appropriate weight as part of primary health care, and promote little or no coordination with other ongoing health coverage extension efforts.32

On the demand side, one-quarter of the poor and nearly one-third of the extreme poor report that they do not seek help from MSPAS facilities because of the financial costs (World Bank 2004). As noted above, out of pocket expenses are high; representing 50 percent of the country’s total spending on health. In an effort to reduce financial barriers to healthcare access among the poor, payments to health centers were legally eliminated by Executive Decree in June, 2002. Nonetheless, reports from the field suggest that, in practice, fees continue to be charged by many health centers. Moreover, the indirect costs of using health centers, such as travel time and the costs of transport also affect the affordability of health care services among the poor. Indeed, the poor report travel times to the nearest health facility that are 17-50 percent longer than those reported by the non-poor, indicating higher time costs (and probably financial costs) to access basic health services.33

In sum, both supply and demand side measures will be needed to ensure that the poorest Salvadorans, especially in more remote rural areas, enjoy adequate access to a package of basic health and nutritional services.

Legal Access to Services

It is estimated that 20-25 percent of people living in isolated rural areas of El Salvador lack identity cards, and that a larger number lack birth certificates - although systematic data on those lacking birth certificates and/or other forms of legal identification do not exist. Reports from local governments and NGOs support this, suggesting that at least in the poorest and most remote municipalities, lack of legal identification is common. Moreover, this is considered an important impediment to access to basic services as well as to access to various types of government support. Officials in the capital echo those concerns as well as concerns about the Central Government’s ability to extend efficient programs of support to the poor in the absence their having clear legal status in country.

32 It should be noted that USAID has been supporting the implementation ofAIN-C in a number of municipalities. 33 World Bank staff calculations, using EHPM data.

43 In this context, in late 1995, the Government of El Salvador created by Legislative Decree No. 488 the Registro Nacional de las Personas Naturales (National Civil Registry) to provide “legal security” to all Salvadorans and through it access to basic services and benefits of the State. Since that time, the Government of El Salvador has initiated efforts to increase civil registration, based on the commitments outlined in the Legislative Decree. In spite of recent efforts, however, there is a need to strengthen the institutional capacity and data, monitoring, and verification systems of the Civil Registry to ensure that all Salvadorans are able to receive legal identification, especially those in the poorest, more remote areas ofthe country.

Social Protection

A recent Social Safety Net Assessment for El Salvador (2002), carried out by the World Bank in collaboration with El Salvador’s main public and private social service institutions, identified that in 2000 the country implemented a wide range of safety net type programs. The study identified as many as 52 different programs implemented by a number of governmental institutions, such as the Ministries of Education, Health, and Labor, the National Secretariat for the Family, the Salvadoran Institute for the Protection of Minors, and, FISDL, as well as a variety of non-governmental actors (Le., private sector, NGOs). As is the case in many developing countries, El Salvador does not have a single institutional entity responsible for safety net programs, nor for communication or coordination across the different implementing ministries and agencies.

These programs are generally small and address a variety of social and economic risks. The greatest number ofprograms addressed risks faced by children under 6 and their mothers (6 programs), efforts to increase learning and retention of children in school (7 programs), the situation of child workers (5 programs), family disintegration (6 programs), and young offenders (3 programs). There was also support for the training and development of adolescents and young adults (6 programs) and the unemployed (2 programs). Issues of discrimination against women (3 programs) and disabled persons (2 programs) were also addressed. For the elderly, besides social insurance programs tied to formal sector employment, only two small support programs were identified. For the provision of basic services there were FISDL programs, the FONAVIPO program of targeted subsidies for housing purchases, the Program for Attention to Earthquake Victims, and in particular, the program Unidos for El Salvador (‘United for El Salvador”, the earthquake reconstruction program).

With a few exceptions, most of El Salvador’s safety net programs to date have been small- scale interventions and/or pilot projects with limited outreach. One exception is the Escuelas Saludables (Healthy Schools), implemented on a nationwide basis by El Salvador’s Education Ministry. Otherwise, most programs have tended to focus on relatively small localized constituencies. Moreover, programs have generally operated in an uncoordinated manner, with relatively little sharing of operational lessons regarding good practices (across projects or agencies). There is also general agreement that the lack of coordination along with the small size of programs has meant that the aggregate impact on poverty of the collection of efforts has been limited.

44 Evidence also suggests that, to date, public spending on safety nets in El Salvador is low by regional standards. The Social Safety Net Assessment found that in 2000 total spending on the safety net from public and private sources was about US $135.4 million. Forty-eight percent of that, or US $65 million, came from the public sector, while the remainder came from non- governmental sources, including the private sector, NGOs, and households. Thus, in 2000 the Government of El Salvador spent about US $65 million on safety net related programs - the equivalent of0.5 percent ofGDP and 3 percent ofCentral Government spending. This compares with average levels of public spending on safety nets of about 1.5 percent of GDP in Central America, 1.4 percent of GDP in Latin America as a whole, and 2.9 percent of GDP in OECD countries (Marques 2003; Spectrum 2003).

These findings indicate the clear scope to strengthen El Salvador’s social safety net- through additional public resource allocations, and the development of a coherent national program to support the poorest Salvadorans in protecting and improving their human capital investments. A key conclusion of the recent World Bank Poverty Assessment is that safety net programs that enable the extreme poor to strengthen their human capital and thus to participate more fully in economic progress ought to be a key component of El Salvador’s poverty reduction strategy. Such programs would operate alongside and be viewed as a complement to traditional line ministry human capital development programs (rather than as a substitute).

Program Background: Programa Red Solidaria (The Solidarity Network Program)

The current government, elected in early 2004, came to power with a strong commitment to strengthening poverty reduction and social progress. Indeed, development of a program to strengthen the human capital of the poorest Salvadorans and to enhance their abilities to participate in and benefit from broader economic progress has been a core element of this administration’s platform. In line with this commitment, in March 2005 the Government of El Salvador launched the Red Solidaria Program, the country’s first integrated program of targeted investments to strengthen the capabilities and incomes of the extreme poor. In line with several findings of the World Bank’s recent analytical work on poverty and social policy (e.g., the Poverty Assessment), the Program has among its key elements a focus on strengthening the human capital of the poorest Salvadorans living in rural areas, by: (i)ensuring access to basic education from pre-school through 6th grade; (ii)ensuring access to a essential health services package, especially for young children and pregnant mothers; and (iii)improving child nutritional status.

The Red Solidaria is designed as a coordinated multi-sectoral effort with three main prongs:34

Red Solidaria a la Familia (Family Solidarity Network) will establish a program of conditional cash transfers (CCT) to the most disadvantaged Salvadoran families living in the 100 poorest municipalities. These transfers, paid to the mother ofthe family, will be made in return for the family hlfilling a series of “co-responsibilities” that involve sending primary school-aged children to school, completing a number of preventative health measures (e.g,

34 Red Solidaria, Government of El Salvador (2005)

45 immunization, child growth monitoring and control, etc.), and parents attending selected training program to strengthen family health and well-being.

0 Red de Servicios Basicos (Network of Basic Services) is being designed to complement and enhance the efficacy of the CCT program by strengthening the supply of basic education, health, and nutritional services in El Salvador’s poorest 100 rural m~nicipalities.~~The Red de Sewicios Bbsicos will also include strategic infrastructure investments in the poorest municipalities, including (i)investments in potable water, sanitation facilities, and electricity for rural primary schools and public health units, and (ii)investment in roads, bridges and other infrastructure to facilitate greater (less costly) access to schools and health service facilities by the extreme poor in these areas.

0 Red de Sostenibilidad a la Familia (Family Sustainability Network) will involve small-scale productive projects and micro-credit programs to support poor agricultural producers in the 100 municipalities to increase their economic productivity and incomes, diversify their income sources, and improve their economic management.

These three prongs are being complemented by a campaign to provide greater legal security and legal access to basic services through a 2-year campaign to provide birth certificates and/or other forms of legal identification to those families in the poorest 100 municipalities who lack such identification.

The Red Solidaria Program is being undertaken under the coordination of the Secretaria Tkcnica de la Presidencia (STP) in El Salvador with implementation by several sectoral Ministries and agencies. The Social Fund for Local Development (FISDL) has been designated as the main executing agency and will have direct responsibility for the implementation of the CCT component, as well as a central coordination role between several ministries and agencies including the Ministry of Education, the Ministry of Health, and the National Civil Registry. Implementation of the Government Program is slated to begin in the third trimester of2005. The first prong, the Red Solidaria a la Familia is being designed as a 3-year program of transfers to support family demand for basic services, to be introduced to eligible families in a phased manner over a several-year period. The second and third prongs, Red de Sewicios Btisicos and Red de Sostenibilidad a la Familia, are being designed as longer-term programs to strengthen the availability and quality ofbasic services and to improve the economic conditions in the targeted municipalities.

35 Efforts to ensure an adequate supply of basic services - as a complement to the CCT program - are consistent with international best practice.

46 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies EL SALVADOR: Social Protection project

The El Salvador Social Protection Project is one of several initiatives supported by the World Bank to reduce vulnerability by: developing a stronger social safety net for the poor, strengthening the education, health, and nutrition ofthe poorest Salvadorans, and improving their ability to participate in and benefit from future socio-economic progress. The Project will create and implement a system of cash transfers to eligible families. Other Bank-financed projects address complementary areas, such as health sector reform, education, environmental services, judicial modernization, land administration, public sector modernization, etc. The El Salvador Social Protection Project is part ofthe World Bank’s country assistance agenda that includes:

Related Projects supported by the World Bank are:

DODP Project Name Amount Financier Sector Issue Ratings Programmatic Broad- US$lOO.O M IBRD DO-S Support reigniting growth, particularly Based Growth IP-s through increased trade and investment. Development Support Reinforce macroeconomic stability and Loan (7275-SV) strengthen fiscal sustainability. Increase the efficiency and transparency ofpublic I sector management Education Reform US$88.0 M IBRD DO-S Promote greater equity, quality, and (4320-SV) IP-s efficiency in the provision ofeducation services. Expand coverage ofpreschool and basic education for low-income students. Environmental Services US$5.0 M IBRD DO-n/a Focus on reducing land degradation, (7300-SV) IP-n/a conserving forested areas, reverting marginal agricultural areas to forest, and encouraging more sustainable land use in agriculture. Judicial Modemization US$18.2 M IBRD DO-MS Improve El Salvador’s judicial system IP-MS by promoting measures aimed at enhancing the effectiveness, accessibility and credibility ofits Judicial Branch. IBRD DO-HS Improve land tenure security and land (7278-SV) IP-s transactions by providing efficient, equitable, and accessible land administration services. IBRD DO-S Define new roles for the public sector Modemization (4082- IP-s and its most important entities. Strengthen operations for those entities that remain in the public sector. Involve sv> the private sector in the provision of 1 public services. IBRD DO-S Expand coverage with improved quality (4224-SV) IP-s and efficiency ofpublic and private secondary schools (grades 10-12).

I I Earthquake Emergency I US$142.6 IBRD DO-MU I Rebuild and improve health sector

47 Recover and Health IP-MU infrastructure damaged or destroyed by Services (7084-SV) the earthquakes. Extend the coverage of essential health and nutrition services and institutional capacity ofthe Ministry of Health to develop and implement policies and priority programs for the health sector.

Related projects by other international agencies include:

2. The Inter-American Development Bank (IDB). In the past years, the IDB funded interventions that are complementary to Social Protection, as part of the Poverty Reduction Strategy .

Loan Approval Project Name Amount Sector Issue Number Date Modernization ofthe US$20.7 1092lOC- 03/04/ 1998 Improve the health oflow-income Health Sector ES-112 Salvadorans by improving the efficiency, equity and quality of the Ministerio de Salud Publica y Asistencia Social's (MSPAS) health services through the implementation of institutional, policy and service delivery reforms. Local Development I1 US$70.0 13 5 2lOC- 09/26/2001 Improve living conditions ofpoor ES populations by strengthening the local development process and improving access to basic services. Competitive Basic US$100.0 ES-0159 06/16/2005 Support attainment ofuniversal primary Education education (1O to 6') and increase the 9* grade completion rate, with quality, for those children at greatest socioeconomic disadvantage in the rural zones and marginal urban schools ofthe 100 poorest municipalities ofthe country. Rural Roads Program US$55.4 ES-L1001 0611612005 Improve El Salvador's tertiary road network in order to better serve rural communities, raise their standard of living and revitalize agriculture.

48 Annex 3: Results Framework and Monitoring EL SALVADOR: Social Protection Project Results Framework

These indicators have been agreed with the ministries of education and health and are already recorded into their information systems. Baselines will be determined for each municipality, before incorporating them into the TCC system, by a special census that will be conducted to assess key characteristics of rural population. They will be reported annually and integrated into the FISDL monitoring system.

These indicators will be measured as described below:

Component 1 - FISDL will report the evolution of families receiving transfers and meeting their co-responsibilities through their monitoring system currently under implementation. Component 2 - This indicator will be measured initially as part of the assessment of the supply ofbasic health services to be carried out in each municipality before incorporating it to the CCT system. NGOs or other agencies responsible for providing family support services will monitor it during implementation. Component 3 - These indicators will be reported by the RNPN as part of their progress in implementing this component and reported through the FISDL monitoring system. Component 4 - These indicators will be measured by FISDL, through its monitoring system for the CCT program, and reported by the STP in the annual progress reports.

PDO Outcome Indicators Use of Outcome Information To improve the education, Primary education net school enrollment in Assess impact ofCCT program on health, and nutrition of the 100 municipalities. improving school enrollment in the Salvadoran children living in project areas. the rural areas of the 100 poorest municipalities. Percentage ofchildren 0-5 years old with Assess impact ofCCT program on complete immunization program. improving coverage ofimmunization program for children.

Malnutrition rate measured as underweight Assess impact ofCCT program on rates. improving reduction of malnutrition rates in the project areas. Intermediate Results Use of Results Monitoring

Component One: Component One: Component One: Implementation ofa CCT Number offamilies receiving conditional Assess pace ofproject program aimed at cash transfers regularly. implementation encouraging extremely poor families to send their 5- 15 Percentage offamilies meeting their years old children to pre- education co-responsibilities regularly Assess level ofbeneficiaries meeting school and primary their co-responsibilities regularly education, to maintain a full Percentage offamilies meeting their health immunization “package” in co-responsibilities regularly children younger than 5 years, and to regularly Percentage offamilies satisfied with basic monitor the growth and education and primary health care and

49 development ofchildren nutrition services. aged 0-24 months. Component Two: Component Two: Component Two: The Ministry ofHealth and Percentage of cantones, within the 100 Assess key performance relevant agencies providing targeted municipalities, covered with the improvements in the provision of full coverage ofprimary basic health and nutrition package. basic health and nutrition services. health care and nutritional services in municipalities Percentage of families satisfied with basic participating in the program. education and primary health care and nutrition services. Component Three: Component Three: Component Three: Increase coverage of Percentage ofpersons younger than 18 personal identification years ofage, living in the Project’s documentation ofpotential targeted areas, which have their birth Assess progress in achieving full beneficiaries by certificate. coverage oflegal documentation. strengthening the Civil Registry for providing such Percentage of family members 18 years of services in the targeted age or older, in the Project’s targeted areas, municipalities. which have legal identification document (“DUI”). Component Four: Component Four: Component Four: Institutional strengthening is Number offamilies included in the registry provided to the STP to fulfill ofbeneficiaries. Assess progress in achieving its strategic role as overall institutional strengthening objectives. coordinator and executive Number oftargeted municipalities with director ofthe Red Solidaria, adequate provision ofeducation and health and to define and move the and nutrition services. program to further stages.

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9 4 0 e e Annex 4: Detailed Project Description EL SALVADOR: Social Protection Project

The Project is comprised of 4 components that will support implementation of the Salvadoran Government’s Red Solidaria Program, as noted above. The first component involves the establishment and implementation of a conditional cash transfer (CCT) program, to support additional investment in children’s education, health, and nutrition by El Salvador’s poorest households. This demand-side intervention will be complemented by a supply-side intervention, component 2, to ensure the provision of a essential health services package and nutrition services in El Salvador’s 100 poorest municipalities. The third component of the Project focuses on improving legal access to services among the country’s poorest families by ensuring that both children and adults have the necessary legal documentation. Component 4 focuses on monitoring, supervision and evaluation of Project outcomes, including measures to assure effective management of the Government’s Red Solidaria Program (Table A4.1 summarizes the Red Solidaria program costs).

Table A4.1: El Salvador Social Protection Project Components cost and source of funding GOES WB IDB TOTAL Component IConditional Cash Transfers (millions ofdollars) Sub component A Conditional Transfers* 51.4 0 0 51.4 Sub component B Support to Beneficiary Families 5.2 0 0 5.2 Sub component C Institutional Strengthening of FISDL 7.0 0 0 7.0 Component ISubtotal 63.6 0 0 63.6

Component I1Expanding Provision ofHealth and Nutrition Services** 0 15 5 20

Component I11 Strengthening Legal Access to Services 0 4 0 4

Component IV Coordination, Communication, Monitoring and Evaluation 0 2 4 6

Social Infrastructure 19 0 48 67

TOTAL PROJECT 82.6 21 57 160.6 * Includes 2% of financial cost ** Includes strengthening MoH to improve supervision

Project Components

The Project components are described in further detail below.

54 15 years old to pre-school and primary education, maintain the fill immunization “package” in children younger than 5 years, and regularly monitor the growth and development of children aged 0-24 months. To ensure the effectiveness of the CCTs, the government not only has followed international best practices to administer, carrying out, and monitoring the program itself, but also has implemented additional support to families through setting a comprehensive set of local institutional arrangements, including a package of services specially contracted out with NGOs.

The conditional cash transfers component constitutes the core element of the first phase of the Red Solidaria, and it will be implemented through the FISDL under the coordination and supervision of the STP. Implementing the CCTs requires close coordination and active participation from the Ministries ofEducation and Health to ensure the timely delivery ofquality services, essential for program impact and for families to comply with their co-responsibilities. The Ministries of Education and Health have participated fully in the design and preparation of Red Solidaria, and they have adjusted their sector development plans to match Red Solidaria’s goals and targets. Their active role during implementation and supervision will be equally crucial for the success ofthe Red Solidaria program.

The component consists of three subcomponents which support these goals: (A) Conditional Transfers; (B) Support to Beneficiaries; and (C) Institutional Strengthening ofFISDL.

A. Conditional Transfers (US$51.4 million). This component would finance and support the creation of a CCT program and the implementation of its first phase during the 2005-2010 period. The transfers will be disbursed to eligible families living in the poorest 100 municipalities. In line with the commitments of the Red Solidaria program, it is expected that this component will benefit up to 80,000 families and roughly 250,000 children under 15 over the period of the project. Selected families will receive the conditional cash transfers for up to three years. There will be two kinds of transfers, one related to health and nutrition and a separate one related to school attendance.

0 Education Transfer. Families living in rural areas of the 100 poorest municipalities with children older than 5 and younger than 15 years of age only would be eligible for an education transfer of $15 per month, regardless of the number of children. Beneficiary families will receive the education transfer as long as all children older than 5 and younger than 15 (who have not already completed primary education) are enrolled in primary school and maintain a class attendance rate of 80 percent.36

During the first phase of the CCT program -2005-2010-, the co-responsibility will require only that children younger than 15 are enrolled in and regularly attend primary schools, given the high late entrance, repetition, and overage rates in very poor Salvadoran families. Even though the lowest income quintile has net enrollment rates of about 80 percent, general completion rates are under 40 percent3’. Accordingly, the emphasis of the project in this phase is increasing school attendance to keep children in the education system. In future

36 This translates into no more than 4 days ofunjustified school absence per month. 37 World Bank (2005) Central America Education Strategy.

55 phases, the program may adjust the education transfer to diminish the age ofeligible children and/or introduce incentives to reduce repetition.

During the first phase ofthe CCT program, education transfers to families will not be strictly linked to the size of the family or the number of school age children. For instance, a family with only one eligible child would receive the same transfer than a family with two or more eligible children. Even though it might create some inequalities, the proposed scheme improves transparency and understanding for the beneficiary families, and encourages them to invest in human capital; in this regard, the size of the transfer is about twice the amount that families from the lowest income quintile spend in education per student3*.For future phases of the program the government will assess the impact of adjusting the education transfer to link it to the number ofchildren.

0 Health and Nutrition Transfer. Families with children under 5 years of age only would be eligible for a health and nutrition transfer currently set at $15 per month monthly regardless of the number of children. The health and nutrition transfer would require that households fulfill the separate co-responsibilities, specifically that: (i)parents assure that all children under 5 are fully immunized under the established health protocols; and (ii)that children under 5, as well as pregnant mothers, participate in regular health and nutrition monitoring, again according to the established health and nutrition

As in other countries, the health and nutrition transfer size is flat regardless the number of eligible children. This scheme has proven to be effective in promoting good health and nutrition' practices within families, improving nutrition status of infants, and increasing utilization of health services. This scheme also prevents negative incentives to increase the number ofchildren in families.

0 Combined Transfer. Families with both children younger than 5 years of age and children younger than 15 years of age attending primary schools will receive two transfers of $10 per month each in only one payment. Eligible families may receive one or both transfers according to the number and age of their children. Both transfers will be conditional on beneficiary compliance with specific co-responsibilities, which should be met independently. Families will receive each transfer for up to three years provided they comply with their co- responsibilities.

38 It is estimated that the average annual private spending per student is $61.4 in families in the first (poorest) income quintile, and $85.9 in families in the second income quintile (The World Bank (2005) Central America: Education Strategv Paper, Volume II. 39 In the case of health and nutrition, transfers to eligible families would be suspended either: (i)if a family were unsuccessful in fulfilling either co-responsibilities in the same month; or (ii)if a family were unsuccessful in fulfilling one (or the other) co-responsibility during two consecutive months.

56 Size of the Family Education Health and Total Transfer Nutrition Payment Transfer Families with children younger than 5 only 15 15 Families with children older than 5 and younger than 15 only 15 15 Families with children younger than 5 and children older 10 10 20 than 5 and younger than 15

The value of the combined transfer per family is about 15-17 percent of the average income of rural households. This proportion is in the range ofthose used in other successful CCT programs in the Latin America region - amounts that have been demonstrated to have a sufficient incentive for families to send their children to school and to regularly attend child growth monitoring sessions, yet sufficiently low to avoid distorting labor market decisions. As can be seen from Table A4.3, in Mexico (Oportunidades), Colombia (Familias en Accibn), and Nicaragua (Red de Proteccih Social), where impact evaluations have shown important positive impacts on family investments in children's human capital transfers range from 15 to 21 percent of average household per capita spending. In Honduras (PRAF, siglas), transfers were less than 5 percent of average per capita consumption. Recent impact evaluation of the PRAF program have shown relatively less impact on families' human capital investments in part, it is thought, due to the relatively small size ofthe transfer4'.

Progradcountry Number of Subsidy per Transfer Program Budget Beneficiary family per year (as a percent of (in US $and as a families (us $1 household per capita percent of GDp) spending) (in thousands) Progresa/Oportunidades 4,200 380 21 $2.3 billion (Mexico) (0.32% of GDP, 200 1) Familias en Accidn 315 260 15 (of MW) $83 million (Colombia) (0.12% of GDP) Red de Proteccidn Social 10 236 18 $5 million (Nicaragua) (0.02% of GDP) PRAF 76 110 <5 $8 million (Honduras) (0.2% of GDP)

Targeting of beneficiary families will be based on the combination of two mechanisms: geographical targeting and proxy means testing (PMT). The geographical targeting, thereby eligibility is determined by location of residence4*, used existing information from a recently

40 The low size ofthe transfer had no significant impact particularly in household consumption (IFPRI (2003) Sexto Informe -Proyecto PRAF/BID Fuse II: Impacto Intermedio, Washington, D.C., July) compared with other countries in which similar programs positively affected household and specially young children consumption (e.g., Familias en Accion in Colombia) 4' Coady, D., M. Grosh, and J. Hoddinott (2004) Targeting of Transfers in Developing Countries. Review of lessons and experiences. The World Band and IFPRI

57 updated poverty map. The methodology used to build the poverty map was the cluster analysis to combine chronic and transient poverty variables at municipal level. The variables used were incidence of extreme income poverty and the extent of severe child malnutrition of students in grade 1 in the location. The incidence of extreme poverty was calculated using special EHPM surveys in which “over sampling” was done to assure statistically unbiased estimates at the municipal level; data on child malnutrition comes from a national nutritional census administered to first grade students nationwide. While the latter obviously does not capture severe malnutrition among children who are not enrolled in school, it is still considered a reasonable proxy for the extent of severe malnutrition at the municipal level. The poverty map used a sample ofabout 80,000 households.

The PMT targeting system is based on estimating a “score” that indicates household’s economic welfare, using a relatively small number of household characteristic^^^. Using the full sample of the household survey (EHPM 2003) the PMT analysis used a linear regression model to estimate the household income per-capita, and a probit model to estimate the likelihood of being extremely Out ofthe initial set of (about 40) variables 10 were selected to be used in the household registration form : (i)household location: ruralhrban and extreme poverty category using the poverty map; (ii)house characteristics: persons per room and cooking with wood; (iii) household member characteristics: number of children younger than 12, years of schooling ofthe household head, number ofpersons working in on agrarian activities, agrarian activities, (micro) entrepreneurial activities; and (iv) households’ goods: refrigerat~r~~.

Using the results of the poverty map, the 262 municipalities of El Salvador were classified in four groups: (i)Severe extreme poverty, including 32 municipalities, (ii)high extreme poverty, 68 municipalities, (iii)moderate extreme poverty, 82 municipalities, and (iv) low extreme poverty, 80 m~nicipalities~~The Red Solidaria program and the Project will focus its efforts on the first two groups -the 100 poorest municipalities (see annex 15). In the 32 municipalities classified as severe extreme poor, given their high poverty incidence (on average over 75 percent including urban areas, which means that prograds targeted population -rural residents- is even poorer) all rural families with children younger than 15 years of age will be eligible for the conditional cash transfer program. The selection of families in the 68 municipalities classified as high extreme poor, where poverty incidence is lower (about 64 percent including urban areas), follows the results ofthe proxy means test.

As per standard practice in conditional cash transfer programs, payments will be made bimonthly and transfers will be made to mothers who will be responsible for the fulfillment of households’ co-responsibilities. The program, through the support offered by the specialized NGOs (see sub-component B below), will encourage that mothers attend workshops and training

42 Coady, D., et. aJ(2004). 43 All poverty indicators used the official poverty line estimated by DIGESTYC: poverty line: household income lower than twice the cost ofa basic food basket or US$1,06 per day; extreme poverty: household income lower than the cost of one basic food basket or US$0.66 per day. 44 A detailed explanation and results can be found in FUSADES (2005) “Instrumentos de Focalizacih Intra- municipal: Metodologia de ‘Proxy Means Test”’, San Salvador, April, 2005. 45 Within each category municipalities were ranked using a specifically created Municipal Marginality Integrated Index (IIMM) based on: poverty gap, a lack ofeducation index (non attendance and illiteracy rates), and a compound index ofhousing qualitative deficit.

58 programs to promote better childcare, home hygiene, healthy food preparation and consumption, etc.

To improve transparency and guarantee a timely delivery of the transfer to beneficiary families, the majority of payments will be made through the Salvadoran banking system. A recent assessment of available banking services in the targeted area showed that it is very likely that the program will need to use the services of several institutions to cover all municipalities and communitie~~~.It may increase the administrative cost of the subcomponent (to up to 2 percent) and require from the FISDL additional control and payment authorization to disburse transfers to families. More over, it is estimated that state or commercial banks cover about 80 percent ofthe communities located in the targeted municipalities. The remaining municipalities will be covered by altemative strategies yet to be defined, including (i)financial NGOs and other institutions, most of which currently manage remittances from abroad, and or (ii)state or commercial banking institutions through temporary specially created mobile branches.

Given the administrative complexity of managing CCTs, the program will be scaled up gradually, in three stages: the first one, from 2006 to 2008, will cover the 32 poorest municipalities of Red Solidaria, the second wave of CCTs will be delivered during the period 2007-2009 in the second poorest 34 municipalities prioritized under Red Solidaria, and the third one will be delivered from 2008 to 2010 in the last 34 municipalities of the Red Solidaria. Between the second semester of 2005 and the end of 2006 the program will registry and start transferring benefits to families living in the rural areas of the 32 severe extreme poor municipalities mentioned above. It is estimated that about 40 percent ofthe eligible families live in these municipalities. Eligible families in the poorest 32 municipalities will be incorporated in the program in two cohorts. Beneficiary families living in the poorest 15 municipalities will be registered in the second semester of 2005 and will start receiving their first transfer before the end of the year (see below for the process that FISDL is implementing to meet this goal). The remaining 17 municipalities will be registered in the early 2006 to catch up with schools calendar.

It has also been planned that, once each of the three CCTs stages be completed, the government will assume the financing of the extension of health services in the correspondent municipalities, following a gradual process that will guarantee the sustainability of the project (see the description presented in annex 6, table A6.1).

As part of the process to prepare and fine tune the beneficiary registry and ensure its reliability and efficiency, the government will test it through a pilot in 6 municipalities, implemented in August and September, 2005. It is expected that evaluating the pilot and adjusting the instruments to create the beneficiary registry (padrdn de beneficiaries) will be completed by mid September. By the end of September, 2005 the government will draft the plan to collect the information and provide specific training to staff, Collecting information and data processing in the remaining 9 municipalities will be completed by October, 2005, and the first payment to beneficiary families will be disbursed before the end of2005.

46 Pacheco, E. (2005) “Definicih de metodologias para realizar trasferencias monetarias de la Red Solidaria en El Salvador”, July.

59 Before the first payment, FISDL will validate the registry at local level community assemblies (conformed to this purpose by FISDL) in which beneficiary families will review and ensure that information in the registry is accurate. In these assemblies families will define the madres titulares and they and the FISDL will sign individual agreements of co-responsibilities. The FISDL will provide a list of co-responsibilities for each member of each beneficiary family. Such lists will be issue once a year. For the first payment to families living in the first municipalities to be incorporated in the program, the education co-responsibility will be the 2005 matriculation registry (matvicula).

In order to guarantee the future sustainability of the program, transfers to families would be financed with govemment counterpart funds only, administered by FISDL under the general coordination ofthe STP.

B. Support to Beneficiary families (US$5.2 million). This subcomponent will finance activities to help beneficiary families to participate in and obtain the maximum benefit from the CCT program. This support will be provided by NGOs specializing in community development, in close coordination with social service providers (e.g., health, education) at the local level. FISDL will serve as the contracting agency for the NGOs.

As part of the support to beneficiary families, the NGOs will: (i)assist families in understanding Program objectives and regulations; (ii)support families in more remote communities to obtain their transfers; (iii)help families to understand and fulfill their co-responsibilities, including identifying barriers to compliance and supporting beneficiary families in overcoming them; and (iii)provide training and workshops in several substantive areas related to the CCT, such as on preventative health and nutrition, the value ofregular school attendance, the costs ofchild labor, and on social audit of basic services. Trainings and workshops will be planned and offered in coordination with social service providers in education and health.

Selected NGOs will support the FISDL with the program implementation process at the local level through:

0 organizing community assemblies to validate information entered in the registry of beneficiaries (padron de beneficiaries), sign the agreements of co-responsibilities between families and FISDL, formally incorporate families in the Red Solidaria, and identifying madves titulaves, mothers who will sign the Program co-responsibility agreements, claim the bimonthly payments, attend the regular workshops, etc.; 0 helping to establish Red Solidaria community committees to ensure adequate communication between beneficiary families, their communities, and the Program, including the channeling ofrequests and/or grievances and facilitation ofthe social audit process; and 0 ensuring that relevant family information is up-to-date in the Red Solidaria information system.

Institutional Strengthening of FISDL (US$7.0 million). This subcomponent would strengthen the capacity of FISDL to: (i)manage the conditional cash transfers, including the registry of beneficiary families, payment cycle, verification of co-responsibilities, and M&E system; (ii) administer the external funds for Project components 3 and 4 in coordination with the RNPN and

60 STP respectively; and (iii)implement infrastructure subprojects needed to complement this Project and to be financed by the IDB. This subcomponent would include technical support, training, development ofinformation systems and equipment.

Coordination. A technical committee was created to ensure adequate coordination ofthe Red Solidaria activities within the FISDL structure; the committee is chaired by the executive manager and conformed by the Executive Director of Red Solidaria, the FISDL managers of Operations, Finance, Systems (IT), and Research and Development, and the heads of Coordination and Registry, and Supervision departments. Operations. The operational activities of FISDL (the Operations Unit) were strengthened through closing the legal and municipal development departments to the operational line of FISDL, and creating at this level a coordination ofRed Solidaria department. Monitoring. The Research and Development Unit was re-engineered and strengthened to administer the beneficiary registry and the M&E system in coordination with the STP, provide reports on program progress and work with the STP in the analysis of program progress and definition of further developments. For these purposes, the Registry and Supervision department was created within the Research and Development Unit.

Strengthening the FISDL to adequate its institutional organization to manage CCTs involves not only an administrative re-organization and internal revision of unitddepartments goals and procedure^^^. In addition, support will be provided through additional highly skilled personnel, training and technical assistance and equipment and technology. As a result, the CCT program will not be administered by a sole coordination unit attached to the FISDL as a separate project, but will be institutionalized within FISDL administrative arrangements to ensure its future sustainability.

This component will also strengthen the technical capacity of FISDL by creating and consolidating within its administrative structure the following tools for CCT management:

A system for targeting Red Solidaria beneficiaries, based on both a geographical targeting using an updated poverty map and a proxy means test mechanism.

A beneficiary registry of families selected to receive direct transfers. Given the crucial importance of the registry of beneficiaries for the adequate operations of the CCTs, its implementation has followed successhl intemational experiences to guarantee that the

47 In sum, after a detailed institutional assessment, the following units or departments within the FISDL are being adjusted and strengthened: Operations, Research and Development, Systems, Legal, and Municipal Development, as well as the FISDL’s field offices.

61 information entered is sufficient, adequate, and accurate, and collected by trained staff. The registry will use information from a census carried out by an external firm contracted out by FISDL and properly audited to oversee and validate processes and results.

The questionnaire to collect data as well as the correspondent manuals was completed during project preparation. Also, by negotiations the government will be finalized (i)the software to enter the information in the system, (ii)the listings (planillas) to be validated in community assemblies, (iii)draft ofagreements of co-responsibilities to be signed by the families and the FISDL, (iv) information on the 2005 matriculation registry, and (v) planillas to authorize disbursement oftransfers to beneficiary families.

0 A monitoring system for verifying compliance ofco-responsibilities, controlling payments to beneficiary families, and generating managerial reports and progress indicators. The FISDL in coordination with the Ministries of Education and Health will collect the information to verify that families comply with agreed co-responsibilities; such verification will be completed before FISDL send to the payment agencies the database with beneficiaries eligible to receive the transfers. This process must be completed every two months. The system is grounded on the principle of ongoing reviewing and updating beneficiary information and compliance ofco-responsibilities.

To ensure the quality of the information provided by the system to verify compliance of co- responsibilities, the following activities will be developed: (i)segmentation of information from beneficiaries and education and health units, (ii)generation of forms to control, update and validate information, and (iii)managerial reports. On the basis ofthis process, the FISDL will authorize individual payments and send the listings (planillas) to payment institutions. Verifying payments to families will be based on information registered by the payment institutions. Such information, which will be sent to FISDL regularly, includes the amount of payments, number oftransfers, and problems (e.g., no shows).

0 An MIS system to track the project’s physical and financial progress during implementation. This system will be designed to generate information and indicators about program implementation as well as real time information to inform project management. The MIS, which will be linked to the STP, will provide indicators on (i)coverage of the Red Solidaria program (e.g., number of families receiving transfers); (ii)effectiveness (e.g., children from beneficiary families attending schools, children from beneficiary families with full immunization scheme, infants under regular growth monitoring); (iii)compliance of co- responsibilities (e.g., families not complying with co-responsibilities, families excluded from receiving payments); and (iv) operational processes of the CCTs to detect problems and introduce timely adjustments to fine-tune implementation.

0 An ongoing system of spot checks of Project operations to validate the data collected for the Project, in particular regarding compliance with co-responsibilities, and the efficiency of operational systems. The spot checks system is a quality control of the information entering the monitoring system and the operations ofthe payment cycle. The system seeks to validate the accuracy of the information received by the FISDL and verify the efficiency of the

62 payment system and compliance of co-responsibility. The spot checks system is based on samples ofmunicipalities and beneficiaries.

Given the importance of ensuring that these tools are in place prior to the start ofthe conditional cash transfers distribution, the systems’ design and initial implementation are being financed by both the PHRD grant and an IDB technical assistance grant.

Component 11. Expanding Provision of Essential Health and Nutrition Services ($15.0 million World Bank financing; $20 million total external financing).

Improving health and nutrition is a basic development objective in its own right. This component serves this objective, but in the context of a larger Social Protection project. Demand side incentives can only improve human capital outcomes if there is an available supply of quality human development services. This component will support the expansion of the existing essential health services package with a focus on maternal and child health, as well as the strengthening of nutritional interventions based on the AN-C integrated community nutrition model in the 100 poorest municipalities where the conditional cash transfer program will be implemented.

By strengthening health and nutrition services, the component will improve communities’ capacities to address the determinants of child malnutrition, maternal and child mortality. Child health and particularly child nutrition are multidimensional and, in part, reflect community development levels. Growth promotion programs such as AIN-C provide feedback on child growth which can be used by the community (with the help ofthe nutrition volunteers and health care workers) to identify appropriate solutions. And the close collaboration among nutrition volunteers and health workers means that the various health problems which directly influence child growth can be addressed quickly, and at the community level.

This component concentrates on the expansion of coverage of a single package of basic health and nutrition services with particular focus on pregnant and lactating mothers and children under five in all the 100 municipalities ofthe Red Solidaria. To do this, it will complement the service provision supported by ongoing World Bank (RHESSA) and IDB (PAM) projects, and will close coverage gaps in those municipalities that are not served by the ongoing projects. Service provision will be contracted out to NGOs, and after December 2006, when the IDB’s PAM project ends, a single unit within the MoHwill be responsible for the provision (through NGOs) of the service in the 100 municipalities.

The MSPAS is currently elaborating a manual for the extension of coverage that will consolidate the experiences gained until today by the ongoing projects. The manual will detail and unify different aspects of the strategy like: i)the content ofthe single basic package of services, ii)the team composition, professional roles and supporting professionals, iii) delivery conditions and quality standards; iv) supervision activities and responsibilities, v) community and social participation, vi) payment mechanisms and incentive scheme. This manual will rely principally on the instruments already developed by the RHESSA and PAM projects.

63 A. Activities. As mentioned, the project will expand the coverage of a package of basic health and nutrition services including the AIN-C to reach universal coverage for the rural population in the 100 targeted municipalities ofRed Solidaria, and will strengthen the supervision ofthe health services delivery contracts by the involved SIBASIs.

(a) Diagnosis, prioritization and social control of service delivery. Provision of services is first preceded by a community health and nutrition diagnosis and planning. This activity is carried out in co-operation with the community leaders and organizations. As a consequence health problems are identified, the expansion of services is presented, the active role of the community to improve the heath of its residents is discussed and committed and the mechanisms for the control and involvement of the community in the delivery of the health services are organized.

(b) Provision of essential health and nutrition services.48 The main focus of this package is the provision ofmaternal and child care services and constitutes the supply-side complement to the CCTs. The package includes the following intervention^^^ (i)maternal (pre and postnatal) care, (ii)sexual and reproductive health, including family planning and the control of sexually transmitted diseases, (iii)child health and nutrition (for children under 5 years); (iv) health education, detection and treatment of the most prevalent communicable diseases (tuberculosis, HIV/AIDS, Dengue) in the general population, and (v) community health prevention, detection and referral of the most prevalent and non-communicable diseases in adults. The package will also include a basic vademecum ofpharmaceuticals according to the list ofessential drugs regulated by the MSPAS.

The following table presents a detailed summary of the main interventions provided within this package ofessential health and nutrition services:

Table A4.4: “SUMMARY OF ESSENTIAL HEALTH AND NUTRITION SERVICES INTERVENTIONS”

48 The PBHS content is aligned with the PBHS agreed under the WB RHESSA project to ensure coherence in service delivery. See Earthquake Emergency Reconstruction and Health Service Extension Project, Project Appraisal Document (Report NO. 22626-ES), October 3 1, 2001. 49 Ifnecessary, the Ministry ofHealth will complement the financing of other health activities in order to ensure provision of a complete package of services.

64 Growth and development control of children under 1 year, under 5 years includes immunization plan and supply of ferrous sulfate, thiamine and zinc School control from 5 to 10 years, including visual and hearing assessment + immunization plan Preventive control from 10 to 19 years, including immunization plan and supply of ferrous sulfate and folic acid to women Care for women: Prenatal control and delivery planning, including immunization plan, supply of iron and folic acid, odontological assessment and standard tests Puerperium control Early detection of uterine cervical cancer Fertility consultation and supply of contraceptives according to couple’s decision Adult care (20-59 wars): Preventive checkup, including early risk detection, detection of hypertension, diabetes Adult care (hO+ vears) I Preventive checkuu. earlv risk detection, detection of hvuertension. diabetes I Detection and treatment of fever symptoms in all ages Detection and treatment ofrespiratory symptoms starting at 10 years Oral examination for all age groups Fluoride rinse for children under 10 years 2.2 Recovery (Primary level-health home, health units, community) Care for morbidity, including diagnosis of diseases prevalent among children under 5 years Care and monitoring for morbidity of diagnosed prevalent infectious diseases: dengue fever, malaria and tuberculosis

As already explained, the project will complement the MSPAS current initiatives (RHESSA, PAM and FOSALUD) to reach universal access to basic health care for the rural population in the poorest municipalities. Thus, eligible people will be 100% of the population living in rural communities (cantones and caserios) of the 100 municipalities targeted by Red Solidaria. Non- rural population already has access to basic health services in these municipalities through the existing MSPAS premises. The table below shows the complementarity among the three projects in the 100 municipalities identified by Red Solidaria, and it also includes those municipalities financed by GOESIMSPAS.

Table A4.5: Health Coverage Extension according to Source of Financing and Modality of Delivery

GOESMSPAS will finance 3 of the 32 poorest municipalities starting in 2005

65 Services under this project will be provided by NGOs contracted by the MSPAS. The NGOs will provide services through: (a) a mobile health care team composed by a doctor, a nurse and an auxiliary nurse (one team per 10,000 population), (b) a local health worker (promotor de salud) who is also part of the health care team but resides in the communities (one every 700-1,000 people), (c) a support team composed at least by a nutritionist and a public health expedproject coordinator.

The promotor de salud will visit each family within the community periodically in order to identify major health risks at the community level. The information collected by the promotor de salud will provide the base for community health promotion and epidemiological surveillance. The mobile team will visit the communities at least once a month. The mobile teams will rely on the information and surveillance collected by the promotor to provide community and individual preventive, treatment and follow-up health services. Therefore, the promotor de salud will provide a link between the community and the mobile health team. In addition, she/he will also provide basic preventive and curative primary health care services52.

Implementation of the AIN-C protocol. The essential health services package and nutrition services will fully incorporate the AN-C model for promoting child growth and development. This strategy promotes early identification ofhealth and nutrition problems in children under two years of age, and in pregnant and lactating women, with the idea of developing immediate and low-cost actions that can be taken by families and health workers. The strategy is based on appropriately trained community volunteers (consejeras voluntarias) who monitor the growth of children under two years old, counsel mothers on proper care for their babies and toddlers advise and monitor pregnant and lactating women and refer to the health team or health center when they suspect other medical or health problems exist. The NGO will be responsible, along with the community, to identify the consejeras voluntarias, provide them with training, support and supervision, and provide the necessary preventive and curative primary health care services to children at risk of malnutrition. Therefore, the community volunteers and promotores de salud

*'In 2009 GOESMSPAS assumes the financing of the 32 poorest municipalities of Red Solidaria. Both RHESSA and the new project stop financing the poorest municipalities in 2009, following the CCTs schedule described above. Thus, RHESSA stops financing 25 (22+3) of the poorest 32 municipalities in 2009 while the new project stops financing 4 ofthe 32 poorest municipalities. The 29 municipalities are assumed by the GOESMSPAS in 2009. 52 In 19 municipalities targeted by the Red Solidaria program and currently financed by the RHESSA project service will be provided by strengthening and adapting the already existing MoH health services provision.

66 work in collaboration with the mobile health team. The consejeras voluntarias will not receive a salary but in-kind incentives for their work. The consejeras voluntarias will be responsible for growth monitoring and growth promotion activities ofchildren under 253.

The AIN-C protocol includes the following activities: (I)Monthly growth promotion sessions for children under 2 years and pregnant women to: (i) weigh children and women; (ii)promote adequate weight gain; (iii)provide individual counseling to mothers on different topics such as childcare, promotion ofexclusive breastfeeding for children under 6 months, appropriate complementary feeding after 6 months, home hygiene, water usage, cooking demonstrations; (iv) check for major illnesses and refer children to the health teams or posts if needed; (v) check for other major health actions (immunizations, essential micro-nutrients such as Vitamin A, iron and zinc). (2) Home visits to sick or not adequately growing children and pregnant women (3) Monthly meetings with the local health personnel for coordination and continuous education. (4) Bi-annual meetings with the whole community and local authorities to discuss the main problems of health and nutrition and find solutions together.

The consejeras voluntarias will organize their growth promotion activities to best accommodate the mothers of the communities during the course of the month54.When the mobile health team comes to the communities the consejeras voluntarias will ensure follow up ofthose children that are found not to be growing well. The mobile health team must find the time to participate to and supervise counseling activities ofthe consejeras voluntarias at least twice a year.

Expanding the AIN-C model will consist of the following steps: (i)identification of the communities, (ii)validation of programs with the communities and local leaders to reinforce their acceptance and responsibility, (iii)selection (with agreement of whole community) and training of community nutrition volunteers, (iv) census of all children under five - conducted by the health worker and the community nutrition volunteers during the first two months of the program and once every year thereafter to track AIN participation and impact on child growth, (v) provision of nutrition activities integrated with the health package and (vi) monitoring, supervision and re-training ofvolunteers.

s3 MSPAS, Manual de Atenci6n Integral en Nutrici6n a Nivel Comunitarioa. 54 Counseling to mothers by the consejeras voluntarias takes some time and cannot be done in the same day when the mobile health team comes to the community.

67 Figure 1. The AIN Strategy

Nutrition Counseling Adequate Weight Micronutrient Gain Supplementation / I 1-1 Immunizations WEIGHTING

EVALUATION Study the Referral and Integrated ADEQUATE disease ’ Management ofIllness (AIEPI) IInadequate Weight Gain

Study other problems, food Healthy ’ availability and food Chldren habits. Nutritional Counseling Supplements

Source: Nutiez. 200.5

The cost of the combined package of health and nutrition services has been established based on the experience of the existing projects, which has issued already contracts benefiting 67,240 people. The average per capita cost is around 18 dollars and is consistent with the cost studies done in preparation for this and existing projects5’. Payments to NGOs will be apportioned monthly based on the average annual per capita cost. A service fee will also be paid to the NGO to promote institutional deliveries, subsidizing the transportation and the variable costs incurred by the hospital. Lastly, an incentive payment up to 5% of the total contract amount will be awarded to the NGO upon fulfillment oftargets set for a list ofintermediate results (agenda sanitaria).

Strenghtening the MoH’s supervision capacity. The project will strengthen the MSPAS, and in particular, the involved SIBASI’s capacity to supervise the NGOs contracts. The MSPAS has prepared a Manual for Supervision ofthe Expansion of Health Services under the existing project and will also be used for the contracts under this project. This Manual establishes a list of ten

55 Nilhda VillacrCs “Estimacion de costos y mecanismos de pago e incentivos del conjunto de prestaciones esenciales de servicios de salud. Proyecto RHESSA” (April 2004). However, the estimated cost ofthe RHESSA project does not include the cost oftraining and retraining ofnutrition volunteers, ofthe in-kind incentives and material and, finally, oftheir supervision.. (Cecilia Ma. “Estimacion de 10s costos del provision y tarifas de provision del Paquete Matemo Infantil (PMI) y Complement0 AIN a ser financiado por la RED SOLIDARIA” (June 2005).

68 indicators to follow-up the performance of the contracts, including: (i)early registration and control of children under 1 years old; (ii)full child vaccination rate (pentavalent vaccine + Tb and polio); (iii)adequate child weight gain rate; (iv) early prenatal care rate (before the 12 weeks); full prenatal care (5 prenatal check-ups); (v) % of communities with operating local health council; (vi) % of women of fertile age involved in family health programs. The MSPAS Information systems have been revised and adapted to allow appropriate monitoring of the perfonnance of these contracts. The community will be involved in the supervision of the delivery of health in two ways. First, the community leader will sign off a community invoice each time the mobile health team arrives to the community, showing the activities performed. Second, the community health council will systematically (at least twice a year) meet with the NGO team and a representative from the SIBASI to discuss the provision of health services in the past period and altematives to improve services in the future. Special attention will be paid to strengthening the institutional arrangements in the Ministry of Health to consolidate this supervision model. This process will also reinforce MSPAS efforts to institutionalize a model of service purchasing through NGOs. The supervision manual will define more precisely the activities and financing needs of each SIBASI in order to strengthen supervision of the nutrition activities to ensure that the consejeras voluntarias have adequate capacity and counseling activities are performed correctly.

B. Project Support The project will support the MSPAS to finance contracts with NGOs which will include: (i)salary of the mobile health team (a doctor, a nurse, an auxiliary nurse for every 10,000 people), the community health workers (one for every 700-1,000 people) and the support team; (ii)in-kind incentives (basic equipment) to the nutrition volunteers (five for every 1,000 people); (iii)rehabilitation of severely malnourished children; (iii)basic medicines included in the package of health services; (iv) micro-nutrients supplementation (folic acid, Vitamin A and iron); (v) training and re-training (once a year plus once at the beginning) ofhealth workers; (vi) administrative costs; (vii) IEC equipment and materials; (viii) cars and gasoline for the mobile teams. In addition, the project will strengthen the supervision capacity of the SIBASIs by financing (i)technical assistance, (ii)training activities, (iii)IT equipment, (iv) transportation equipment, and (v) other operating costs.

Component 111. Strengthening Legal Access to Services through Expanding the Civil Registry (US$4 million) This component will support the National Civil Registry (RNPN) in expanding legal access to basic education and health services in the 100 municipalities targeted under the Red Solidaria by ensuring that families and individuals that lacking proper legal status are able to obtain the appropriate legal documentation. Specifically, this component will focus on ensuring that all members ofeligible families, including those older than age 15, are incorporated in the national civil registry system and possess the personal identification documents to gain access to basic public services - either in the form of a national Identity Document (Documento Unico de Identidad - DUI) or a birth certificates (for minors under 18 years ofage).

This component will involve collection of data on families in the 100 municipalities targeted by the Project, as part of the census being collected by FISDL to register the Red Solidaria’s beneficiary population. The RNPN will use this census to identify the part of the population without proper documentation and those requiring verification, correction, or updating of their

69 identity documents. On the basis of the census, the RNPN will identify three groups requiring action: (i)children younger than 18 years old without birth certificate, (ii)adults older than 18 years of age with birth certificate but not DUI, and (iii)adults older than 18 years old with neither birth certificate nor DUI. Every family will be notified by the RNPN regarding the status of their members, as well as of the processes required to obtain proper legal identification. DUI Centers (associated with the RNPN) will then process the necessary identity documents. To facilitate the process, the RNPN will establish mobile DUI Centers, where required, to ensure that those in the most remote rural areas are able to obtain the identity documents.

Component IV. Monitoring, Evaluation and Management of the Red Solidaria Program (US$2.0 million World Bank financing, $6.0 million total external financing). The Project also will support the implementation ofthe Red Solidaria Program through the establishment and strengthening of an appropriate institutional structure. In this context, the Project will support the strengthening of the Secretaria T6cnica de la Presidencia (STP) - to ensure the adequate design and implementation of the operational rules and norms of the Red Solidaria Program, effective inter-institutional and inter-sectoral coordination, an effective social communication and dissemination strategy, and appropriate supervision and monitoring of the Program. As the current Red Solidaria Program constitutes the first phase in what will eventually be a broader social protection strategy, it will be important as well to continue to strengthen the STP’s capacity to undertake strategic as well as operational planning.

To this end, the Project will support the development of a small technical team in the Red Solidaria Unit of the STP, including an Executive Director (already hired from within the STP) and a small core staff), as well as provide technical support, training, and the equipment necessary to fulfill its coordination, supervision and monitoring functions. The Project will also support the development of a set ofoperational instruments to support the STP team’s activities, including: A social awareness strategy aimed at the beneficiary population, basic service providers and other stakeholders, consisting of basic information to be disseminated about the Program, as well as national and local level workshops for the technical and administrative staff of the various ministries, agencies, municipal and local committees and NGOs carrying out activities under the Red Solidaria. An information system linked to the M&E system being developed and administered by the FISDL to enable follow-up on the program’s progress during implementation. The Census of the potential beneficiary families of the Conditional Cash Transfer Program. The database will be collected following a methodology developed by FISDL and acceptable to both Banks. An external impact evaluation to measure the effects of the program (both demand and supply-side interventions) on school enrollment and attendance, nutrition, immunization, and utilization of health facilities. The evaluation, which will be contracted out with a highly specialized firm, will use a baseline developed for that purpose, along with follow-up surveys. Regular Program audits. On a four-monthly basis, each executing entity will prepare and submit to the WB and IDB a financial monitoring report (FMR) containing: (i)a statement of

70 sources and uses of funds and cash balances (with expenditures classified by subcomponent); (ii)a statement of budget execution per subcomponent (with expenditures classified by the major budgetary accounts); (iii)a physical progress report; and (iv) a procurement monitoring report. While based on WB’s FMR Guidelines, the FMR format will be flexible enough to satisfy needs of the Government, WB and IDB. The FMRs will be submitted not later than 45 days after the end of each four-month period.

On an annual basis, each executing entity will prepare project financial statements including cumulative figures, for the year and as of the end of that year, of the financial statements cited in the previous paragraph. The financial statements will also include additional information as required under IDB Audit Policy and WB Audit Guidelines (e.g., explanatory notes in accordance with the Cash Basis Intemational Public Sector Accounting Standard (IPSAS), and each executing entity’s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement). These financial statements, once audited, will be submitted to the WB and IDB not later than 120 days after the end of the Government’s fiscal year (which equals the calendar year).

71 Annex 5: Project Costs EL SALVADOR: Social Protection project

El Salvador Social Protection Project Summary of Project Cost Estimates (US$ Million)

A. 1. Conditional Cash Transfer Program 1.I Conditional Cash Transfers (CCTs) - 51.4 I.2 Support to Beneficiary Families 5.2 5.2 1.3 Institutional Strengthening of FlSDL 0.2 6.7 7.0 Subtotal 1. Conditional Cash Transfer Program ---0.2 63.3 53.61 B. 2. Expanding Provision of Basic Health and Nutrition Services 2.1 Ensuring provision of a single basic package of health and nutrition services - 16.7 16.7 2.2 Supervision of the Health Packages Subtotal 2. Expanding Provision of Basic Health and Nutrition Services C. 3. strengthening Legal Access to Services through Expanding the Civil Registry 3.1 Civil Registry System 0.2 3.6 3.81 Subtotal 3. Strengthening Legal Access to Services -- through Expanding the Civil Registry 0.2 3.6 3.8 I D. 4. Monitoring, Evaluation and Management of the Red Solidari Programm 4.1 Monitoring, Evaluation and Management of the Program 0.0 6.0 Subtotal 4. Monitoring, Evaluation and Management of -- the Red Solidari Programm 0.0 6.0 6.01 E. 5. Infrastructure Improvement - 67.0 Total BASELINE COSTS ---0.4 157.7 158.1 Physical Contingencies 0.0 0.5 0.51 Price Contingencies ---0.0 2.1 0.4 160.2~ 160.6 Total PROJECT COSTS I

Ei Salvador Social Protection Project Project Cost Summary cost World (US$ Million) Including %of Bank % Contingencies Total Financing Financing A. I,Conditional Cash Transfer Program 1.1 Conditional Cash Transfers (CCTs) 51.4 32.0 1.2 Support to Beneficiary Families 5.2 3.2 1.3 Institutional Strengtheningof FISDL 7.0 4.4 Subtotal 1. Conditional Cash Transfer Program 63.6 39.6 B. 2. Expanding Provision of Basic Health and Nutrition Services 2.1 Ensuring provision of a single basic package of health and nutrition services 19.0 11.8 14.3 75.0 2.2 Supervision of the Health Packages 1.0 0.6 0.8 Subtotal 2. Expanding Provision of Basic Health and Nutrition Services 20.0 12.5 15.0 75.0 C. 3. Strengthening Legal Access to Services through Expanding the Civil Registry 3.1 Civil Registry System 4.0 2.5 4.0 100.0 Subtotal 3. Strengthening Legal Access to Services through Expanding the Civil Registry 4.0 2.5 4.0 100.0 D. 4. Monitoring, Evaluation and Management of the Red Solidari Programm 4.1 Monitoring, Evaluation and Management of the Program 6.0 3.7 2.0 33.3 Subtotal 4. Monitoring, Evaluation and Management of the Red Solidari Programm 6.0 3.7 2.0 33.3 E. 5. InfrastructureImprovement 67.0 41.7 Total PROJECT COSTS 160.6 100.0 21.0 13,l-I

72 El-&lvador Social Protection Project Project Components by Year -Totals Including Contingencies (US$ Million) Totals Including Contingencies -----2006 2007 2008 2009 2010 Total A 1. Conditional Cash Transfer Program 1.1 Conditional Cash Transfers (CCTs) 7.5 14.4 14.4 11.0 4.1 51.41 1.2 Support to Beneficiary Families 0.8 1.6 1.6 1.2 - 5.2 1.3 Institutional Strengthening of FISDL -----0.9 1.9 1.6 1.6 Subtotal 1. Conditional Cash Transfer Program 9.2 17.9 17.6 13.8 l:: B. 2. Expanding Provision of Basic Health and Nutrition Services -1 2.1 Ensuring provision of a single basic package of health and nutrition services - 2.8 6.1 5.6 4.5 19.01 2.2 Supervision of the Health Packages - 0.3 0.3 I Subtotal 2. Expanding Provision of Basic Health and Nutrition Services - 3.0 6.4 C. 3. Strengthening Legal Access to Services through Expanding the Civil Registry 3.1 civil Registry System ------1.6 1.1 1.1 0.2 Subtotal 3. Strengthening Legal Access to Services through Expanding the Civil Registry - 1.6 1.1 1.1 D. 4. Monitoring, Evaluation and Management of the Red Solidari Programm 4.1 Monitoring, Evaluation and Management of the Program -----1.3 2.1 1.3 1.3 Subtotal 4. Monitoring, Evaluation and Management of the Red Solidari Prosramm- 1.3 2.1 1.3 1.3 - 6.01 E. 5. Infrastructure Improvement -----19.0 23.0 15.0 10.0 - 67.0 Total PROJECT COSTS 29.5 47.6 41.4 32.0 10.0 160.6

El Salvador Social Protection Project Expenditure Accounts by Years -- Totals Including Contingc (US$ Million) Totals Including Contingencies -----2006 2007 2008 2009 2010 Total I. Investment Costs A. Infrastructure 19.0 23.0 15.0 10.0 - 67.0 B. Consulting Services Local and International Consultants 1.4 2.6 2.6 2.6 0.5 9.6 Consulting Firms 0.4 1.2 0.4 0.4 2.4 Audits 0.1 0.1 0.1 0.1 0.2 Payment to NGOs 0.8 1.6 1.6 1.2 5.2 Subtotal Consulting Services -----2.6 5.5 4.6 4.2 0.5 17.4 C. Cash Transfers 7.5 14.4 14.4 11.0 4.1 51.4 D. Fees to NGOs - Nutrition packages 2.8 6.1 5.6 4.5 19.0 E. Training 0.0 0.0 0.0 0.0 0.1 F. Equipment, Furniture and Materials Furniture 0.0 0.0 0.0 Equipment 0.2 0.6 0.0 0.8 Materials 0.1 0.3 0.2 0.2 0.7 Subtotal Equipment, Furniture and Materials -----0.3 0.9 0.2 0.2 1.6 G. Operating Cost 0.02 0.02 0.02 0.02 0.1 Total Investment Costs -----29.5 46.6 40.4 31.0 9.0 156.6 II. Recurrent Costs A. Personnel (FISDL) 1.o 1.o 1.o 1 .o 4.0 Total Recurrent Costs -----1 .o 1 .o 1.o 1 .o 4.0 Total PROJECT COSTS -----29.5 47.6 41.4 32.0 10.0 160.6

73 El Salvador Social Protection Project Comnents bv Financiers Govemment of El inter-American (US$Miilion) ------Salvador Total A I,Conditional Cash Transfer Program 1 1 Conditional Cash Transfers (CCTs) 51.4 100.0 - 51.4 32.0 1.2 Suppit to Beneficiary Families 5.2 100.0 - 5.2 3.2 1.3 Institutional Strengthening of FlSDL 7.0 100.0 - 7.0 4.4 Subtotal 1. Conditional Cash Transfer Program ------63.6 100.0 - 63.6 39.6 B. 2. Expanding Provision of Basic Health and Nutrition Services 2.1 Ensuring provision of a single basic package of health and nutrition selvices - 14.3 75.0 4.8 25.0 19.0 11.8 2.2 Supelvision of the Health Packages - 0.8 75.0 0.3 25.0 1.0 0.6 Subtotal 2. Expanding Provision of Basic Health ------and Nutrition Services - 15.0 75.0 5.0 25.0 20.0 12.5 C. 3. Strengthening Legal Access to Services through Expandingthe Civil Registry 3.1 Civil Registry System 0.0 - 4.0 100.0 - 4.0 2.5 D. 4. Monitoring, Evaluation and Management of the Red Solidari Programm 4.1 Monitctina. Evaluation and Manaaement of the Prcxrram - 2.0 33.3 4.0 66.7 6.0 3.7 E 5 lnfrastmctire Improvement 190 284 - 480 716 670 41 7 Total PROJECT COSTS ------826 514 210 131 570 355 1606 1000

3 Salvador Social Protection Project 3isbursement Accounts by Financiers Government of El Inter-American :US$ Million) Salvador World Bank Development Bank Total Amount % Amount % Amount YO Amount % A. Conditional Cash Transfers 51.4 100.0 - 51.4 32.0 0. Goods Equipment and Furniture 0.4 45.9 0.4 49.6 0.0 4.5 0.9 0.5 Materiales 0.4 54.5 0.3 45.5 --0.7 0.5 Subtotal Goods 0.8 49.8 0.8 47.7 0.0 2.4 1.6 1 .o C. Consulting Services Local and International Consultants 2.1 19.1 5.2 47.6 3.6 33.2 11.0 6.8 Fees to NGOs 5.2 100.0 - - --5.2 3.2 Subtotal Consulting Services 7.3 45.1 5.2 32.3 3.6 22.5 16.2 10.1 D. Audits 0.2 100.0 0.2 0.1 E. Training 0.1 100.0 0.1 0.1 F. Infrastructure 19.0 28.4 48.0 71.6 67.0 41.7 G. Operating Cost 0.1 100.0 0.1 0.1 H. Recurrent Cost 1. Pernnel (FISDL) 4.0 100.0 4.0 2.5 2. Nutrition packages - --15.0 75.0 5.0 25.0 20.0 12.5 Subtotal Recurrent Cost 4.0 16.7 15.0 62.5 5.0 20.8 24.0 14.9 Total PROJECT COSTS 82.6 51.4 21.0 13.1 57.0 35.5 160.6 100.0

74 75 2. Institutional Structure and arrangements for component 1

The Project will support the institutional and implementation arrangements of the Red Solidaria, helping to consolidate this innovative social protection strategy to sustainable reduce extreme poverty. The project will be directed by an Inter-ministerial Board (“Consejo Directivo”) that will be chaired by the head of the Technical Secretariat to the Presidency (STP). It will be composed ofthe Undersecretary and Social Sectors Coordinator of the STP, and the ministers of education, health, finance, economy, interior (“gobernacion”), public works, agriculture, environment, labor, and the heads of the water and sewerage agency, FISDL, RNPN, social security agency, youth agency and national registry center. Its main role will be to establish policies, strategies and overall operating framework for the project (and the larger Solidarity program), approve annual programs and budget and control performance and overall achievement of objectives and results. Overall management of the project will reside with the Social Sectors Coordinator within the STP, whose main functions are to translate board decisions into specific directives for project implementation, to ensure that project activities are in line with sectoral policies, to manage general coordination with line ministries, and to track and support the availability offinancial resources.

The technical management will be supported by an Executive Director at the STP who will be responsible for the day-to-day management of the project, and who will ensure that all project components are implemented effectively and on a timely basis, coordinate actions with all agencies involved in implementation, and ensure that financial resources for project implementation the are available on a timely manner. The STP as executive director will also be responsible to establish and manage a project monitoring system and will chair and be supported by a Technical Council with working level participation of ministries of health and education, FISDL and other agencies involved in project implementation. Its basic role is to coordinate project implementation actions to ensure that the supply of basic education and health and nutrition services is available to beneficiaries ofthe CCT program.

The FISDL will implement the CCT program. The FISDL is being restructured to comply with the component’s operational requirements, which include administering the targeting mechanisms, creating, managing and updating the beneficiary registry, verifying beneficiary compliance with co-responsibilities, and managing transfers disbursement to beneficiary families. The FISDL will also coordinate with the Ministries ofEducation and Health, and other central implementing agencies to ensure the availability of basic services prior to transfers disbursements. The FISDL will establish local committees to coordinate actions at the local level, act as liaison with municipal governments, and involve grass roots organizations. Following STP guidelines, the FISDL will be responsible to contract specialized NGOs to provide support and training to communities and families.

FISDL, as the implementing agency ofthe CCT component ofthe Project is being restructured to address the operational requirements of this component. The FISDL will lead technical coordination with the Ministries of Education and Health, and other central implementing agencies to ensure availability ofbasic services. It will establish local committees to coordinate actions at the local level, act as liaison with municipal governments, and involve grass root

76 organizations. It will also provide support and training to communities and families through specialized NGOs.

At local level, the program will be carried out with the support of agents: municipal coordination committee^^^, local committees, and community assemblies.

The Municipal Coordination Committee (MCC). The MCC is the local body in charge of institutional coordination ofRed Solidaria, and comprises delegates fi-om the institutions and agencies involved in the program, local authorities, and community representatives. Its main role is supervising and following up Red Solidaria operation in the municipality, coordinate the supply of basic services, and support the program to integrate its different activities at local level. The committee will be the focal point to facilitate the dialogue between the Red Solidaria program and its direct providers of services, and beneficiary families to plan and carry out local tasks within the program. The Local Committee (LC). The LC will be conformed at community or caserio level and will comprise no less than three delegates from the beneficiary families in the community to follow up education, health, and social audits. The LS, created in the community assemblies, will (i)canalize complains and feedback regarding Red Solidaria, (ii)organize social audits, and (iii)organize community tasks related to infrastructure services and their operation. The Community Assemblies (CA). The CA comprises the mothers or representatives of beneficiary families at the community or caserio level. As mentioned before their main functions include: (i)selecting the madres titulares, (ii)validating the information entered in the beneficiary registry (padron de beneJiciarios), (iii)conforming the LCs, and (iv) signing the agreements ofco-responsibilities,

3. Institutional and implementation arrangements for component 2

This component aims to extend essential health and nutrition services in the 100 poorest municipalities by contracting NGOs, as a complement to the ongoing Earthquake emergency reconstruction and health services extension WB project (RHESSA) as well as the IDB (PAM) project. The quality and efficiency ofpublicly financed essential health and nutrition services is expected to be improved and access expanded, with special emphasis on targeting low-income and underserved populations.

The Health and Nutrition package. The RHESSA project would support the expansion ofhealth service coverage in 99 municipalities, 73 of them located in the Northem Region and the remaining 26 in the Central and Para-Central Region. In the Northem region, targeting mechanisms identified the 73 poorest and most underserved municipalities in the region’s six departments. The total beneficiary population is estimated at 250,000. Beneficiaries live in areas where no MSPAS providers are present and will receive essential health and nutrition services from NGOs, with a per capita cost estimated at $18 per year. The per-capita payment is designed to cover salaries, supplies, minor equipment, pharmaceuticals and transportation. This component also supports service provider start-up costs related to training and consultancies. In the Central and Para-central regions, the RHESSA project support MSPAS service provision to about 200,000 beneficiaries who live in the earthquake-affected areas. This population will

j6 This committee was created by the Red Solidaria National Board on July, 2005.

77 receive the same services provided in the Northern region but via a strengthened MSPAS primary care network. The MSPAS has a strong presence in these regions, but service provision has been weakened as a result ofearthquake related damage.

Only 68 of the 99 municipalities covered by the RHESSA project are within the Red Solidaria project area, 49 in the Northem region and 19 in the Para-Central Region. Both projects are pooling efforts to deliver a standard basic health care package, and assure that the nutrition part is reinforced through the implementation of the AIN-C strategy. The IDB project covers 13 municipalities in the SIBASI of Ahuachapan and Sonsonate and provides a basic health care package that already includes AIN-C. The cost of this package is $21. Only 9 of these municipalities have been identified as part of the Red Solidaria project area. Since the IDB project concludes in 2006, the new WB project will support health care coverage in those 9 municipalities, providing the same standard Red Solidaria health care package. This new project will also support health coverage extension in the 20 municipalities of Red Solidaria that currently do not receive any external support, and guarantee health coverage extension in 34 municipalities during the year 2010 when none ofthe ongoing projects will be functioning.

As shown in table A6.1 below, in 2007 the project will provide a complete package of health services to the 9 municipalities that were previously financed by the IDB PAM project and are among the 100 poorest of the country. In 2007 the project will also support health services extension in 9 of the Red Solidaria municipalities which belong to the second poorest group of within Red Solidaria and have not received any financial support yet. In 2008 the package of health services will be extended to the remaining 11 municipalities that have not receive any support yet and belong to the final cohort of municipalities to be incorporated to the CCTs intervention. Finally, in 2010 the project will provide health coverage extension to the 34 municipalities of the last cohort. This scheme has been designed and coordinated accordingly to the CCTs schedule previously described, guaranteeing, therefore, that both supply (health coverage extension) and demand (CCTs) sides are complementary throughout the period of implementation ofthis project.

The government will be assuming gradually the financing of health coverage extension in the 100 municipalities following the schedule designed for the CCTs delivery. After the first CCT delivery period (2006-2008), the govemment will finance the 25 ofthe 32 poorest municipalities previously financed by the RHESSA project and 4 of the 32 poorest municipalities previously financed by IDB/PAM and the new project. Likewise, after the second CCT delivery period (2007-2009), the govemment will assume the financing of the 34 municipalities ranked as the second poorest group within Red Solidaria. Finally, once the third CCT delivery period (2008- 2010) is completed, the govemment will assume the financing of the last 34 municipalities within Red Solidaria (see table A6.1 below).

The AIN-C component. The GOES has set a goal ofcovering 100% ofrural communities within the Red Solidaria by 2010. This expansion of AIN is a core element of the country’s health policy and, therefore, this project has coordinated with the existing RHESSA project the strengthening of the nutrition component of the health package that is currently being delivered following the AIN strategy. AIN-C is now being implemented in 117 municipalities and 650 cantones, with approximately 1,360 nutrition volunteer workers benefiting about 20,000 children

78 and 3,000 pregnant women. The MSPAS now intends to expand the program to all communities in the 100 poorest municipalities prioritized by Red Solidaria, starting with the poorest 32 municipalities of the country. Since 4 of these 32 municipalities receive IDB PAM project support for the complete AIN strategy, during the first year of implementation, AIN coverage will be expanded to the remaining 28 municipalities with the support of the World Bank RHESSA project and the GOES/MSPAS to reach about 15,000 children under age two and a total of about 35,000 children under age five. The new Project will finance extension of a complete health and AIN package to 20 municipalities that currently receive no health services, will give continuity to the provision of9 municipalities currently financed by the IDBPAM after 2006 and will finance the provision of the complete package in 34 municipalities in 2010 once the RHESSA project had been closed.

Table A6.1: Financing scheme for health and nutrition services in the 100 municipalities.

Institutional arrangements of components 3 and 4

The strengthening of Legal Access to Services component will be managed by the Civil Registry Agency (RNPN) through a small unit that will report directly to the executive president of RNPN. This unit would be responsible for implementing project activities.

FISDL will be responsible for the administration of hnds to implement components 3 and 4 of the project to reduce administrative costs and facilitate implementation activities. Given the relatively small amount of resources to complete actions included in these components and the strong administrative, financial management and procurement capacity of the FISDL, implementation of these components will be completed under inter-agency agreements between FISDL and RNPS and STP respectively, to guarantee that technical knowledge from the specialized agencies is appropriately incorporated during implementation.

79 Annex 7: Financial management and disbursement arrangements EL SALVADOR: Social Protection Project

Organizational Arrangements

The loan borrower will be the Republic of El Salvador, represented by the Ministry of Finance (MH). Overall project coordination will fall under the Executive Director of the Red Solidavia, which is part ofthe Technical Secretariat ofthe Presidency (STP).

Project administration responsibilities will be assigned to two executing entities: the FISDL for components 1, 3, and 4, and the MSPAS for component 2. Within FISDL, the Financial and Administration Management Unit will be directly in charge of financial management (FM) matters. Within MSPAS, that role will be played by the Project Coordination Unit of the Reconstruction of Hospitals and Extension of Health Services Project (UCP-RHESSA). The latter is financed by the WB, as are education infrastructure components and a trust fund grant currently executed by FISDL.

The fact that both entities have ongoing experience managing projects financed by the WB, for which they make use of suitable administrative structures and systems, puts these agencies in an advantageous position to take over, with relative ease, the Social Protection Project FM tasks. These will basically include: (i)budget formulation and monitoring; (ii)cash flow management (including processing loan withdrawal applications); (iii)maintenance of accounting records, (iv) preparation of in-year and year-end financial reports, (v) administration of underlying information systems, and (vi) arranging for execution ofexternal audits.

In both agencies, staff capacity and structure are adequate for project FM purposes. However, the prospective increase in transactions may call for additional medium-level staff assistance, which would be eligible for project financing.

Budget Planning

During the second quarter ofthe year, each executing entity will prepare its tentative investment program for the next year. The program should be consistent with the budget policy provided by the MH, be incorporated into the public investment information system (SIIP), and -once approved- be reflected in the annual budget proposals ofeach executing entity. These budgets, in turn, will be incorporated by the MH into the national budget for the President’s submittal to the National Assembly in September.

On the basis ofthe approved budget, the executing entities will adjust as needed their respective project annual work and procurement plans (POAs), which will be reviewed by the WB and IDB.

Accounting and Financial Reporting

Accounting Policies and Procedures. The main FM regulatory framework for the project will consist of: (i)the Financial Management Law (Ley AFI), which governs the formulation,

80 approval, execution and monitoring of the budget, the treasury operations, the government accounting system, and the investment and public credit functions; (ii)the annual Law of the General Budget ofthe State; (iii)the MH regulations and manuals based upon the cited laws; (iv) FISDL’s manual of financial procedures and practices; and (v) UCP-RHESSA’s operational manual.

Project-specific FM arrangements that are not contemplated in the documents cited above will be documented in a concise FM section of the project’s operational manual. Among others, specific reference will be made to: (i)the inter-institutional arrangements between FISDL and the National Civil Registry (RNPN) for the coordination ofpayments related to component 3; (ii)the contractual and payment terms of basic health and nutrition services; (iii)the pre- and post- payment controls related to conditional cash transfers (CCTs); and (iv) the formats of project financial and audit reports.

Information Systems. The FISDL will operate financial transactions using its integrated information systems: budgeting, treasury, accounting, transfers, sub-proj ect financial control, and loan agreement control. The latter will be adapted to extract data from the accounting system so as to prepare the project financial statements.

A critical action will be the development of the CCT management information system, and the linkages between the underlying beneficiary and conditionality control databases and the production of payrolls, which would be monitored and cleared through the mentioned transfer and sub-proj ect financial control systems.

As a unit with de-concentrated access to the Government’s integrated financial management system (SAFI), the UCP-RHESSA will operate financial transactions directly into the SAFI information system, complemented with a simple reporting system to extract data from SAFI to prepare the project financial statements.

Financial Reports. On a four-monthly basis, each executing entity will prepare and submit to the WB and IDB a financial monitoring report (FMR) containing: (i)a statement of sources and uses of funds and cash balances (with expenditures classified by subcomponent); (ii)a statement of budget execution per subcomponent (with expenditures classified by the major budgetary accounts); (iii)a physical progress report; and (iv) a procurement monitoring report. While based on WB’s FMR Guidelines, the FMR format will be flexible enough to satisfy needs of the Government, WB and IDB. The FMRs will be submitted not later than 45 days after the end of each four-month period.

On an annual basis, each executing entity will prepare project financial statements including cumulative figures, for the year and as ofthe end ofthat year, ofthe financial statements cited in the previous paragraph. The financial statements will also include additional information as required under IDB Audit Policy and WB Audit Guidelines (e.g., explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard (PSAS), and each executing entity’s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement). These financial statements and FISDL’s own

81 financial statements, once audited, will be submitted to the WB and IDB not later than 120 days after the end ofthe Government’s fiscal year (which equals the calendar year).

Flow of Funds

WB Disbursement Method. Loan proceeds will be withdrawn by each executing entity using the transaction-based disbursement method (provided the WB does not suspend disbursements). The disbursement documentation format (e.g., Statements of Expenditures “SOEs”) will be harmonized, to the extent possible, with that used by IDB (“SAFO-BID”).

WB Special Accounts. The MH’s General Treasury Directorate (DGT) will open and maintain two separate special deposit accounts (one per executing entity) in US Dollars in the Central Reserve Bank (BCR), to be used exclusively for deposits and withdrawals of loan proceeds for eligible expenditures. After the conditions of effectiveness have been met, and the special accounts have been opened, each executing entity will submit its first disbursement request for the authorized allocation ofno more than 10 percent of the amount of the loan. For subsequent withdrawals, each entity will submit the documentation referred to in the previous paragraph.

Other Procedures. By appraisal, no need has been identified for the use of WB direct payments and special commitment procedures. Should the need arise during implementation, the WB will evaluate it and, if granted, agree to the use of the cited procedures with the Borrower through a modification ofthe Disbursement Letter.

Flow of Funds: FISDL. As needed, the FISDL will send periodic requirements to the DGT for transfers from the Special Account to the project’s operational account. The latter will be opened by FISDL in a commercial bank, and will be used to issue checks or make deposits to providers for expenditures eligible for WB financing.

For the CCT counterpart financing, the FISDL will operate a CCT counterpart account funded by FISDL’s Red Solidaria budget and by the Ministry of Education’s (MINED) budget. The account will be opened by FISDL in a commercial bank, and will be used to pay for CCTs.

The payment terms of CCTs will be detailed in the project’s operational manual. In brief, according to a bi-monthly payroll, the FISDL will advance the amounts to the designated payment agents (e.g., banks or other financial institutions), who upon completing the payment process will present the supporting documentation to FISDL to clear the advances. Only cleared payments will be considered documented expenditures.

Flow of Funds: UCP-RHESSA. Using the SAFI system, the UCP-RHESSA will send periodic fund requirements to the DGT to support fund transfers from the Special Account to the project’s operational account (co-funded by IDB), in accordance with the amount of documents pending payment (“accruals”). The operational account will be opened by the UCP-RHESSA in a

82 commercial bank, and will be used to issue checks or make deposits to providers for expenditures eligible for WB financing.

The contracting and payment terms for basic health and nutrition packages will be detailed in the project’s operational manual. In brief, according to current RHESSA arrangements, the payments will be based on a contractually agreed per capita rate, with a maximum advance to each provider of 20 percent of the annual contract, followed by monthly payments and advance clearances against invoices and service delivery reports.

WB Disbursement Schedule

Amount of the Loan Allocated Yo of (Expressed in Expenditures & Cateqory Dollars) be financed (1) NGOs Fees; and consultants services under Part B of the Project (Expanding Provision 14,700,000 75% of Basic Health and Nutrition Services). (2) Goods; and consultants’ services under

Part C of the Project (Strengthening~- Legal 4,000,000 100% Access to Services). (3) Consultants’services under Part D.5 of the 1,600,000 100% Proiect. (4) Consultants’services under Part D.3 of the 400,000 50% Project (Impact Evaluation). (5) Unallocated 300.000 Total 21,000,000 I

Note: the 25% of expenditures under category (1) and the 50% of expenditures under category (4) are to be financed by IDB.

Audit Arrangements

Internal Audit. In the course of its regular intemal audit activities vis-&vis the institutional budget, the executing entities’ internal auditors may include project activities in their annual work plans. The executing entities will provide WB and IDB with copies of internal audit reports covering project activities and financial transactions.

External Audit. The annual project financial statements will be audited following International Standards on Auditing (ISA), by independent firms and in accordance with terms of reference (TORS) both acceptable to WB and IDB guidelines and policy. The audit opinions covering project financial statements will contain a reference to the eligibility, documentation, and recording of expenditures. In addition to the annual audit report, it has been agreed with IDB that a semestral audit report with the same scope will be submitted to both Banks no more than 60 days after the end ofeach semester.

83 Operational audit reports on the preparation, payment and clearance of CCT payrolls will also be produced on a semestral basis. The same periodicity is expected for the production of memoranda on intemal controls (“management letters”).

The audit work described above can be financed with loan proceeds. FISDL will contract the first extemal audit within three months after loan effectiveness. Each audit contract is expected to cover at least two years.

Financial Management Action Plan

Action Responsible Entity Completion Date 1, Put into operation the CCT management information FISDL Before effectiveness system, properly linked to FISDL’s FM systems. 2. Set up simple complementary systems for preparation Executing entities Before effectiveness ofFMRs . 3. Identify and, if possible, incorporate required Executing entities Before effectiveness incremental staff assistance. 4. Finalize FM section of the project operational manual. Executing entities Before effectiveness 5. Incorporate project expenditures into the budgets ofthe Executing entities Before effectiveness executing entities. 6. Finalize audit TORSand short list ofexternal auditors. Executing entities Before effectiveness 9. Contract external auditors. Executing entities 3 months after effectiveness

WB FM Supervision Plan. A WB FM Specialist should perform a supervision mission prior to effectiveness. After effectiveness, the FM Specialist must review the annual audit reports, should review the financial sections of the FMRs, and should perform at least one supervision mission per year. To the extent possible, these activities will be coordinated with IDB counterparts.

84 Annex 8: Procurement Arrangements EL SALVADOR: Social Protection project

A. General

1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Works: Even though no works are likely to be financed with funds from the World Bank loan, ifnecessary, works required for the project would be procured using the Bank’s Standard Bidding Documents (SBD) for all ICB and SBD agreed with the Bank for NCB and shopping (model Request for Quotations - RfQ).

3. Procurement of Goods: Goods procured under this project will include computer hardware and software, office fumiture and equipment, vehicles (including ambulances), equipment for health units, etc. The goods will be procured using the Bank’s Standard Bidding Documents (SBD) for all ICB and SBD agreed with the Bank for NCB and shopping (model Request for Quotations - RfQ).

4. Procurement of Non-Consulting Services: Non-Consulting Services required for training activities such as workshops, hotel and transport services, as well as other services as needed will be procured using SBD or model RfQ agreed with the Bank.

5. Selection of Consultants: Consulting firms and individual consultants will be hired under the project to provide services such as impact evaluation studies, diagnostics, financial and procurement audits, advisory services from individual consultants, supervision, PCU management, etc. In addition, NGOs will be contracted to deliver health and nutrition services to the municipalities under component I1 of the project. In the specific case of NGOs already providing services to municipalities under the Earthquake Emergency Reconstruction and Health Services Extension project 7084-ESYfinanced by the WB, single source selection of those NGOs will be considered subject to verification that they have the required profile, the capacity, and that the original selection followed the WB guidelines for selection of consultants. In all other cases, advertisements requesting expressions of interest will be published in either national or international newspapers, depending on the estimated amounts of the contracts, and NGOs will be selected through a competitive process as per the WB Consultant Guidelines. The second tier institution or commercial bank required to implement the Conditional Cash Transfer Program under Component Iwill also be selected according to the Consultant Guidelines.

85 6. Operational Costs: Operational costs have been identified in the procurement plan.

7. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, are presented in the Project's Operations Manual.

Thresholds recommended for the use of each method discussed above are identified in the table below, which also establishes the notional thresholds for prior review. These thresholds will be reviewed when the PIU gains experience with WB Guidelines. As indicated in paragraph 1 above, the agreed procurement plan will determine which contracts will be subject to Bank prior review.

Thresholds for Procurement Methods and Prior Review

Contract value threshold Expenditure category

Works ...... First two each calendar year. Regardless of value Direct Contracting All > 250 ICB All 50 to 250 NCB First two each calendar year. Goods < 50 Shopping First two each calendar year Regardless of value I Direct Contracting I All I > 500 ICB All Non-consulting 50 to 500 NCB First two each calendar year. services < 50 Shopping First two each calendar year Regardless of value Direct Contracting All > 200 QCB S/QB S/FBS/LCS/ All Consulting < 200 QCBS/QBS/FBS/LCS (firms) a ...... /CQS Regardless of value Single Source Regardless of value 1 Section V in the Consulting Guidelines I None (individual) a Regardless of value Direct Contracting Must be approved in the procurement plan otherwise subject to prior review

Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-Based Selection FBS = Fixed Budget Selection LCS = Least-Cost Selection CQS = Selection Based on Consultants' Qualifications

86 B. Assessment of the agency’s capacity to implement procurement

Procurement activities for Components 1, 3 and 4 will be carried out by the Social Investment Fund for Local Development (FISDL). Procurement activities for Component 2 will be carried out by the Ministry ofHealth (MoH).

In the case of FISDL, in order to promote institutional strengthening, the procurement function will be integrated within the organizational structure of FISDL. The project’s procurement officer will be integrated within the institutional procurement unit (UACI). In the case ofMoH, procurement activities will be carried out by the PCU implementing the Earthquake Emergency Reconstruction and Health Services Extension project 7084-ESYfinanced by the WB. The PCU will be strengthened with an additional procurement assistant if necessary.

A full assessment ofthe capacity ofboth FISDL and MoHto implement procurement actions for the project was carried out in June and August 2005. The review included the organizational structure for implementing the project, the volume and complexity ofprocurement actions for the new project as well as the new arrangements by which the procurement function will be integrated into FISDL’s relevant central procurement unit (UACI) and the PCU in the MoH.

It was found that FISDL has the necessary systems and procedures in place as well as previous experience in implementing the infrastructure component ofthe Education reform Project, 4320- ES, financed by the WB. The PCU in MoH currently implementing the Earthquake Emergency Reconstruction and Health Services Extension project 7084-ESYfinanced by the WB, has also gained the required experience in implementing procurement.

In light of the past experience of both implementing agencies, the overall project risk for procurement is MEDIUM.

C. Procurement Plan

The Borrower, at appraisal, developed a procurement plan for project implementation that provides the basis for the procurement methods. This plan will be agreed between the Borrower and the Project Team prior to negotiations. It will be available in the project’s database and in the Bank’s external website. The procurement plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

In addition to the prior review supervision to be carried out from Bank offices and although the overall risk assessment has been rated as MEDIUM, it is recommended that procurement supervision take place every six months during the first year of the project and once a year thereafter and to reassess the capacity of the PCU to carry out procurement after one year in order to review the prior review thresholds.

87 E. Action Plan

The following actions are recommended to address weaknesses identified by the Bank and to increase the capacity ofFISDL and MoHin order to ensure that both entities have the capacity to implement procurement:

Procurement Cycle Manapement: The Procurement Plan will be finalized and approved prior to negotiations and included in the Operations Manual for the project. Standard bidding documents for all procurement methods must be prepared for use by the project and should be based on the Bank’s SBDs in the case ofNCB. Model Requests for Quotations (RfQ) for Goods and Works must also be prepared, approved by the Bank, and included, along with the other SBDs, in the Operations Manual. During project launch, the PCU staff concerned should be trained in the use and application ofthe SBDs. Close supervision by the Bank is recommended during the initial stages of project implementation, especially in the area of contract administration which is considered weak.

Organization, Staffing and Functions: It has been agreed that a procurement officer with relevant Bank procurement experience will be hired by each of the implementing agencies prior to effectiveness. Although this person will be physically in the UACI, in the case ofFISDL and in the PCU in the case of MoH, he will respond to the project coordinator. Since internal manuals and instructions do not exist, priority should be given to preparing the Operations Manual. It is recommended that procurement training courses offered in Spanish be identified for the procurement officer(s?) to attend.

Support and Control Systems: Since no auditing procedures are in place, the audit requirements must be established in coordination with financial management. Technical and administrative controls must be established, implemented and included in the Operations Manual. FISDL and MoH must immediately enforce the fraud and corruption provisions in the Bank guidelines and SBDs. Anticorruption clauses must be included in all bidding documents.

Record Keeping: Proper record keeping will have to be ensured and a check list included in each file to permit verification that all relevant information is included. As the volume of procurement increases, it will be necessary to define a physical area to keep all records and files ofthe procurement processes under the project.

88 Details of the Procurement Arrangement involving international competition.

1. Goods and Works and non consulting services.

(a) List ofcontract Packages which will be procured following ICB and direct contracting: NONE

(b) ICB Contracts estimated to cost above US $250,000 for Goods and US $ 5,000,000 for Works per contract and all direct contracting will be subject to prior review by the Bank.

2. Consulting Services.

(a) List ofConsulting Assignments with short-list of international firms.

3 4 5

Description Estimated Selection Review Method by Bank Proposals Assignment cost (Prior I Submission Post) Censo de 400,000 SBCC Prior Registro de Beneficiario Consultoria Prior para el registro y certificacibn Evaluaci6n de 400,000 I SBCC Prior impact0 y operativas Comunicacibn Prior Social 250y000 SBCC (Asistencia I TCcnica y estrategia)

(b) Consultancy services estimated to cost above $100,000 per contract and Single Source selection ofconsultants (firms will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists ofconsultants for services estimated to cost less than $200,000 equivalent per contract, may be composed entirely ofnational consultants in accordance with the provisions ofparagraph 2.7 ofthe Consultant Guidelines.

89 Annex 9: Economic and Financial Analysis EL SALVADOR: Social Protection project

Introduction

The Red Solidaria, like other social assistance programs that use conditional cash transfers to reduce poverty and raise the human capital of the poor, are multi-sectoral and multi-dimension by their nature. Such programs can have a range of economic and social benefits. Among other things, the Red Solidaria could generate:

immediate reductions in income poverty resulting from extremely poor households’ receipt ofa cash transfer (as well as a reduction in income inequality, due to the redistributive effects of targeting the transfer to the poorest municipalities and, within them, the poorest households);

increases in household food consumption due to the income effects of the transfer and, thus, immediate improvements in child and family nutrition (through both higher and healthier consumption);

gains in education, both due to the income effect of the transfer and the “price effect” associated with the school attendance co-responsibilities; increases in enrollment and years of schooling can be expected to result, among other things, in greater productivity, earnings, and income on the part ofthe student as an adult; and

gains in health and nutritional status due to both the income effect of the transfer and the “price effect” associated with the health and nutrition co-responsibilities; improvements in health status has direct welfare effects, but can also be expected to increase schooling levels, improve cognitive achievement, as well as productivity, earnings and incomes as an adult.

Training associated with the CCT program are intended to reinforce and strengthen the impact of the cash transfers by imparting critical information and knowledge regarding improved health and nutritional practices, on the value of immunization and other preventative healthcare visits, on the value of continuing education, and so on.

The multi-dimensionality of the Red Solidaria and other similar programs makes it difficult, if not impossible, to quantify in monetary terms all the different social and economic benefits; this is true both for conceptual and data-related reasons.57 More specifically, given existing data, it is possible to quantify only the private benefits associated with improved education, health, and

’’ Some argue that social assistance should not be evaluated purely on the basis traditional cost-benefit analysis, by virtue offocusing on ensuring a minimum level ofwell-being to societies’ poorest habitants. Indeed, trying to quantify the economic benefits ofdeclines in poverty or improvements in income inequality raise a number of difficult conceptual issues. The recent project appraisal document, “Brazil: BR Bolsa Familia” notes that while it is feasible to measure the potential magnitude ofimpact ofthe transfers on poverty and inequality, it is neither possible nor desirable to quantify the monetary value ofsuch benefits (World Bank 2004).

90 nutritional status, measured in terms of expected additional earnings of direct Program beneficiaries over the working life. Several important categories of (potential) benefits of the program are not valued here. These include:

the “economic value” ofreductions in poverty and/or income inequality;

the social benefits associated with basic human capital investments (e.g., fostering better learning environments, and health and nutritional practices both among the current and subsequent generations);

reduced family healthcare costs associated with more and better preventative care provided and fostered through the program;

positive spillover effects to non-beneficiary families - in terms of better access to basic health and nutritional services and/or to legal security/identification - available through the project to all families within a target municipality, whether or not they are eligible to receive for conditional transfers under the Red Solidaria; and

the general equilibrium effects (benefits) of greater human capital investments associated with higher future rates of economic growth and faster future poverty reduction.

In spite ofthese limitations, it is possible to generate what might be considered reasonable lower- bound estimates ofthe (private) economic benefits - in terms ofincreased earnings and income - that can be expected via improved education, health, and nutritional status among children in the households targeted under the Program. This is the approach adopted here and presented in the following section. After presenting the results of this cost-benefit analysis for the Project, the Annex briefly summarizes the findings of several recent impact evaluations from similar CCT programs in Latin America (e.g, in Brazil, Colombia, Mexico, Nicaragua, and Honduras) to highlight the range of impacts that have been realized (and measured ex-post) elsewhere. The Annex ends with a summary ofthe results ofthe financial analysis carried out for the Project.

Economic Analysis

This section summarizes the economic analysis carried out to identify, ex ante, a subset of the economic returns associated with investing in the Red Solidaria Project in El Salvador. With benefits due to both increased access and improved quality of basic health, nutrition, and educational services, the benefits ofRed Solidaria are estimated to exceed the costs, indicating that this is a sound economic investment. This analysis concludes that, at a 10 percent discount rate, the net present value (NPV) ofthe project will be between US $7.2 and $45.7 million, with an intemal rate ofreturn (IRR) of 11-15 percent, depending on the assumptions (Table A9.1).

91 Table A9.1: Net Present Value (NPV) of the Red Solidaria Project (in US $) (using a 10% Discount Rate)

costs Present Value ofProject Costs* 7 1,008,345

Present Value ofEducation Benefits (increased earning) 64,05 1,932

Present Value of Benefits from Reductions in Stunting 9,23 1,427 (measured via increased productivity and earning) 1 Benefits (Base Case) Present Value of Benefits from Reductions in Anemia 1,340,643 (measured via increased productivity and earning)

Present Value benefits associated with saved lives 3,5 3 9,02 6

Total Present Value of Benefits 78,163,030 Base Scenario (0.6 additional Net Present Value (NPV) 7,154,684 years ofschooling on average) Internal Rate of Return (IRR) 11% Scenario 2 (0.9 additional Net Present Value (NPV) 45,744,667 years of schooling on average) Internal Rate ofReturn (IRR) 15%

Specifically, Table A9.1 presents the estimated NPV and IRR for the Project under two different scenarios. The costs of the project are defined as the costs of Components 1-4 of the Project as defined in this PAD (including all World Bank, IDB, and GOES financing for those component^).^^ In terms of benefits, two scenarios are presented here, using alternative assumptions about education-related impacts of the project. The base case scenario assumes an increase of years of schooling among beneficiaries - the combined effects of increased enrollment levels and continuity in schooling - of 0.6 years, on average. This figure is slightly below the average increase of nearly 0.7 years found as part of the impact evaluation of the Progresa program in Mexico (IFPRI 2000; Schultz 2000). The second scenario assumes an increase of 0.9 years of schooling on average. The methodology and core assumptions used to generate these figures are elaborated in great detail below.

’*The cost of the infrastructure component, being prepared and financed solely by the IDB, is not included in the analysis. This is due, in part, to a lack of project-specific information on the benefits associated with this component. Nonetheless, evidence from other projects indicates that investments in the types of infrastructure investments being undertaken under the IDB component - for example, water, sanitation, and “strategic infrastructure” investments (e.g., in rural roads, pedestrian bridges, etc.) - generally have high economic returns (Walker 2005; add citation). Moreover, under the operational rules negotiated between the GOES and the IDB, local sub-projects will be evaluated and selected on the basis on cost-benefit analysis; only those sub-projects found to have benefit-cost ratios ofgreater than 1 will be selected (Red Solidaria Operational Manua1,forthcoming).

92 Methodology and Assumptions of the Analysis

The basic methodology involves standard cost-benefit analysis, in which a discounted stream of expected benefits is compared with a discounted stream ofproject costs. A discount rate of 10 percent was used to discount the net stream oftotal benefits generated by the Project. This is the rate normally used in World Bank to evaluated projects, which represents the investment opportunity cost ofproject resources.

Beneficiary population. As stated in the Project description, it is assumed that the potential beneficiary pool is 250,000 children under the age of 15 from 80,000 extremely poor households in rural parts of El Salvador’s poorest 100 municipalities. As is described further below, different assumptions are made about the impact of the Project on education and health outcomes, affecting the expected benefit streams.

Estimating the benefits of improved educational outcomes. To estimate the private benefits associated with additional schooling, the standard procedure is to identify how many new individuals will enroll and how many years of schooling they and existing enrollees will have due to the Program and then to estimate how much additional (discounted) income they will earn over their lifetimes due to the additional schooling. The assumption behind this extemal efficiency analysis is that by gaining additional years of schooling, individuals will be more productive and have more access to better paid jobs and therefore will have higher eamings during their lifetime.

The estimated schooling impacts and, thus, expected benefits of the Red Solidaria program were calibrated off of the findings of a recent impact evaluation of the Progresa program (now called Oportunidades) in MexicoO5’ Specifically, the impact evaluation found that the Progresa program led to an increase of 0.66 years of schooling, on average, among eligible families (Schultz 2000; IFPRI 2000). As noted above, the base case scenario assumes an increase of 0.6 years of schooling among program beneficiaries, on average, while the second scenario assumes an average increase of 0.9 years of schooling. An upper bound of 0.9 years is seen as reasonable for the purposes ofthis analysis. This is true both because the poor in El Salvador are starting at lower levels of educational attainment, than were seen in Mexico at the start of Progresa (and thus incremental gains may be accrue more readily), and because education outcomes in El Salvador have shown themselves to be responsive to active policy measures on the part of the GOES, as was seen in the case ofthe EDUCO program.

To estimate the stream of benefits associated with additional years of primary schooling under the Program, private rates of retums were applied using results of retums to education analysis reported in the World Bank Central America Education Strategy 2005 (using data from El Salvador from 2001). Those estimates indicate that one additional year of primary education increases worker earnings by 6.2 percent. Calculations of the stream of discounted benefits associated with this additional education assume that upon completion ofschooling, beneficiaries work until the age of60.

*’More information and to access the collection of evaluation studies on Progresa can be found at: www.ifuri.org.

93 Estimating the benefits of improved health and nutrition. Given that Project implementation will take place over a 5-year period, it was recommended that the Project use underweight rates, rather than chronic malnutrition (stunting) as its Results Framework indicator. For data-related reasons, however, it is difficult to use this measure for the cost-benefit analysis. Nonetheless, the health and nutrition interventions of the Project are also expected to have impacts on other aspects of health and nutrition, such as chronic malnutrition, anemia, and Vitamin A deficiency, which yield lar e pay offs and which previous analyses from other countries provide some basis for measuring. 6f

Evidence indicates that young children who suffer from chronic malnutrition and are stunted (two or more standard deviations below the median of an international comparison group) earn significantly lower incomes throughout their economically active lives. Given its irreversibility, the prevention of chronic malnutrition increases an individual’s potential income earning capacity relative to what it would have been had he or she not suffered from malnutrition. Thus, the benefit of reducing chronic malnutrition is measured by the increased income-earning capacity of the persons whose nutrition status is better than it would have been without the Project. The same approach is taken in the case of anemia. Recent empirical studies estimate the negative effects of stunting on worker productivity and adult earnings to be about 10 percent, controlling for other factors; productivity and earning effects of childhood anemia are estimated to be about 4 percent, again controlling for other factors (see, e.g., Hoddinott 2003; Quisumbing; Gillespie and Haddad 2003; Alderman, Hoddinott and Kinsey 2002; Ross and Horton 2003).

The average rate of stunting in El Salvador was 19.6 percent in 2002 (World Bank 2004). However, according to the recent demographic and health survey for El Salvador (FESAL 2002/3), chronic malnutrition rates among children under 5 are about 40 higher in low-income households than the national average (or about 27.4 percent). Similarly, in El Salvador the incidence of anemia in children under 5 is 19.8 percent; however, the rate among low-income houses around 21 percent higher, at 23.8 percent (FESAL, 2002/3).

The benefit ofreducing chronic malnutrition and anemia is estimated here as the present value of the increase in the beneficiaries’ future income flow (to age 60), based on the successful avoidance and/or elimination of stunting and anemia as a result of the Project. For the purposes of these calculations, it is assumed that the Red Solidaria will be effective in bringing down chronic malnutrition and anemia rates among the poor to their national (average) levels. Consistent with the recent empirical literature, it is assumed that children that avoid stunting and/or anemia, will have an earnings premium of 10 percent and 4 percent, respectively (calibrated from the unschooled wage), due to increased productive potential. Moreover, consistent with empirical literature that finds that better nourished children stay in school longer, it is assumed that these children also benefit from an additional 0.6-0.9 years of schooling than they would have had, if they had not benefited from better nutritional status.61 It is assumed that two-thirds ofthe children who experience chronic malnutrition also experienced anemia, and the calculations are set up to assure that the education benefits associated with better nutritional status are not doubled counted.

60 See, for example, “Honduras: Nutrition and Social Protection Project,” World Bank, 2005. 61 The choice of 0.6 or 0.9 years of additional schooling corresponds to the base case and second scenarios, respectively.

94 In addition to experiencing chronic malnutrition and anemia, Salvadoran children under 5 also often experience some vitamin A deficiencies (VAD).62 Recent studies from Central America show that severe vitamin A deficiencies can result in children deaths. In El Salvador, for example, it is estimated that 150 Salvadoran children under age 5 die per year as a result of Vitamin A defi~iency.~~For the purposes of these estimates, it is assumed that two-thirds of these deaths occur among Red Solidaria beneficiary households, due to the high correlation between poverty and Vitamin A deficiency.

To address concerns about Vitamin A and other micronutrient deficiencies, as part ofthe Project, the AIN-C consejras voluntarias will distribute vitamin A and iron capsules to all children less than five in their communities. The value of the reduction in the number of deaths of children under 5 as a result of distributing vitamin A is also included in the cost-benefit analysis, employing a human capital methodology. Specifically, as with other measured benefits, these benefits are estimated as the discounted future income flow received by the proportion of these children whose lives are saved by the project, as they are expected eventually to become part of the economically active population. Note that in accordance with a World Health Organization- established standard (Murray and Lopez 1994), a 3 percent discount rate is generally used to discount the future income streams received by people whose premature death has been averted due to the project (ie., in the valuation oflives saved by the project). Consistent with the general approach taken in this cost-benefit analysis, the standard 10 percent discount rate has been applied, providing a conservative lower bound estimate for the value of lives saved.

As suggested above, the expansion of health and nutrition to rural areas will have other direct benefits that cannot be quantified here due to lack of sufficient data. For example, the AIN-C component of the project will generate cost savings as a result of the mothers and caretakers of children under five substituting AIN-C consejeras voluntarias care for MSPAS preventive and curative services. A recent study from Honduras provides a sense of the orders ofmagnitude; a USAID evaluation of the AIN-C Program in Honduras found that mothers who participated in the AIN-C Program substituted the care and consultation of local consejeras voluntarias for visits to Honduran Secretariat ofHealth (SOE) facilities. The study found the following impacts: (i)a 29.6 percent reduction in the number of SOH outpatients consultations for respiratory illness; and (ii)a 49 percent of reduction in the number of SOH outpatient consultations for diarrhea, which translated into significant cost savings and, thus, project benefits.64

Evidence of Impact from other CCT Programs in Latin America

Conditional cash transfer programs (CCTs) have become widespread in Latin America. An interesting feature of the implementation of CCTs in the region is that most have been accompanied by rigorous impact evaluation studies in their pilot phases. These impact

62 The highest prevalence ofVAD in Central America (36 percent) was found in El Salvador in 1988; the rate is higher in rural areas of the country (4 1 percent), San Salvador, Ministerio de Salud Publica y Asistencia Social, 1988. 63 See ww.micronutrient.org. 64 These benefits are, in principle, available to all families in the targeted municipalities, and not solely those families who receive the cash transfer.

95 evaluations have demonstrated a wide range of benefits of the programs including, but not limited to positive benefits in education, health, and nutrition.

For example, a thorough evaluation of the Progresa program in Mexico found that the program’s interventions reduced poverty by about 10 percent among the beneficiaries (relative to a control group). It was also estimated that the depth of poverty was reduced by 30 percent, which the severity of poverty was reduced by 36 percent. In addition, recent analyses of Progresa, as well as ofthe CCT program in Nicaragua (RPS) has also shown that and Honduras (PRAF) have also played an important role in protecting poor households from the adverse consumption and human capital impacts of economic shocks (World Bank 2005).

Table A9.2 summarizes key evaluation findings of the positive impacts several CCTs in the region (e.g., in Brazil, Colombia, Mexico, Nicaragua, and Honduras) have had on household food expenditure, chronic malnutrition, and primary school completion among the poor. As can be seen in the table, in all cases where impacts on food consumption and/or primary completion were analysis, these CCTs have had positive impacts. In the cases of Bolsa Alimentacao in Brazil and Progresa in Mexico, it was found that in addition to increases in the value of food consumption, there were also improvements in dietary composition and quality. In four of the five CCTs evaluated, the programs were also found to contribute to significant reductions in chronic malnutrition (stunting) among beneficiaries relative to a control group (Table A9.2).

Table A9.2: Impact of CCT Programs on Food Consumption, Chronic Malnutrition, and Primary

Difference (in percentage points) between treatment and control groups. After 7 years in program, except Colombia (after 2 years in program) Source: Adapted from Table 1

In sum, the evidence from the cost-benefit analysis ofthe Red Solidaria and the review ofrecent impact evaluation from other countries suggest that the Project will be an economically sound investment, as well as one that provides a range ofbenefits to the poorest Salvadorans.

Financial Analysis

The total (undiscounted) cost of the Project is estimated at US$166,800,000 (of which US$2.6 million is ~nallocated).~~The main investment ofthe Program, the conditional cash transfers, is

65 This figure includes the infrastructure component being financed by the IDB.

96 expected to have a cost of $13.7 million in 2007 and 2008, equivalent to 0.1 percent of the GDP. The cost of the CCTs will be fully financed by the Government's own-raised finds. As explained in Annex 4, the major recurrent costs generated by the Project are related to expenditures in health, which are estimated to reach $6.4 million in 2008. From 2007, FISDL will generate $1 million per year in recurrent costs. Therefore, from 2009 government will need to finance part of the recurrent costs generated by the Project ($0.5 million in 2009 and $1.7 million in 2010). When the Project finishes, it is estimated that the fiscal costs of investments will reach $7.4 million, from which $6.4 million will be expenditures required to finance the essential health services package.66

The fiscal burden generated by the new Project is less than 0.1% ofthe GDP. Health investments are about 2.3 percent ofthe annual budget of the MSPAS, while FISDL recurrent costs are about 2.7 percent of its annual budget. The Government is committed to assuming all recurrent costs generated by the Project. In the case of health services, this process will be supported by the development of a comprehensive strategy for the entire profile of investments to extend basic health and institutional services throughout El Salvador.

Table A9.3: Financing of InvestmentmecurrentCost and Financial Charges, by Year (US$ Million) Implementation Period 2006 2007 2008 2009 2010 Total From 201 1 on I. Investment Costs Gov. Of El Salvador (total) 19.9 21 .a 19.3 17.5 GOES (CCT) 6.9 13.7 13.7 10.28 3.42 51.4 IBRD 0.4 2.6 1.5 1.3 0.2 6.0 IDB ------14.5 17.6 11.6 8.3 52.0 Total Investment Costs 34.9 42.0 32.5 27.1 0.2 136.6 II. Recurrent Costs Gov.of el Salvador 1.o 1.o 1.o 1.o 4.0 IBRD 2.3 4.8 4.4 3.5 15.0 IDB ------0.8 1.6 1.5 1.2 5.0 Total Recurrent Costs" 4.0 7.4 6.9 5.7 24.0 Recurrent costs to be borne by GOES 0.5 I.7 7.4 Total Financing of costs 34.9 46.0 39.9 33.9 5.9 160.6 10% 23% 25% 3.0% 17.6% Source: World Bank staff calculations.

66 It is to note that this fiscal cost ofthe project includes only investments in expanding coverage of the essential health and nutrition services financed with this project. Therefore, it does not includes the current investments financed with the Bank project RHESSA which will generate a financing gap of about $4 million in the period 2009- 2010 and from 201 1 on the annual cost will be about $7 million.

97 Annex 10: Safeguard Policy Issues EL SALVADOR: Social Protection project

Social

A social assessment was carried out as an inter-institutional effort. It included (a) a desk review of existing relevant information, including data on indigenous peoples; and (b) a country-wide Participatory Rural Assessment executed by a local multi-disciplinary team accompanied by FISDL, MOH, and MOE evaluation staff, with technical assistance ofthe World Bank. The latter included informed consultations (focus groups and interviews) with current and potential stakeholders and beneficiaries, as well as direct observation. A sample of twenty-one communities was selected for the assessment within the 32 ‘severe extreme poor’ municipalities in 19 municipalities of 9 departments coverin all three country regions (East, Central, and West). It included 8 indigenous67 communities6f and 16 communities where the AIN program is being implemented. The evaluation assessed (a) the adequacy of the project design in terms of the mechanisms proposed to include the poorest and more isolated population, (b) stakeholders and beneficiaries’ perceptions on access and utilization of services in education, health (nutrition) and civil registry, (c) the opportunities (or lack of) presently offered to the more isolated communities to part-take ofthe benefits of services, and (d) the existing mechanisms of social control to ensure every child has access to a school and has updated health records, and all adults have access to PHC.

The results of the assessment were analyzed in light ofthe Red Solidaria Program. Conclusions and recommendations were drawn to improve the project design and ensure project program ownership and social control by stakeholders and beneficiaries. To that end, a ‘Social Participation, Inclusion and Gender Plan’ was proposed to ensure the inclusion of the target groups, particularly vulnerable population (children 0-5 and in primary school, isolated families, Indigenous peoples, single parent-families, orphans, etc.). Moreover, an Indigenous Peoples Plan was proposed to ensure that inclusion mechanisms are in place for a successful operation, as outlined by the Operational Policy 4.10 on Indigenous Peoples which recommends “broad community support to the project by the affected Indigenous Peoples” (OP 4.10, paragraph 11).

Some socio-economic characterization of the 100 poorest municipalities

The total universe for intervention under the project is 790,367 inhabitants. It includes 34,645 households or 175,000 people classified as severe extreme poor, and 126,362 households or 615,300 people within the high poverty category. According to the Poverty Map, the average number ofpeople per household is highest for the severe extreme poor (5.05) compared with the

67 For purposes ofthe OP 4.10, the term “Indigenous Peoples” is used in a generic sense to refer to a distinct, vulnerable, social and cultural group possessing the following characteristics in varying degrees: (a) self- identification as members ofa distinct indigenous cultural group and recognition ofthis identity by others; (b) collective attachment to geographically distinct habitats or ancestral territories in the project area and to the natural resources in these habitats and territories; (c) customary cultural, economic, social and political institutions that are separate from those ofthe dominant society and culture; and (d) an indigenous language, often different from the official language ofthe country or region. (OP 4.10, paragraph 4) An indigenous community is a community (region, department, municipality, canton, aldea, caserio, neighborhood) large or small, integrated by indigenous peoples.

98 low poverty municipalities which have 4.12 people per household. Population density is considerably lower for the severe extreme poor (106 inhab/Km) compared to the 574 inhab/Km for the low poverty areas, which makes rendering of services more difficult for the severe extreme poor. Extreme poverty is concentrated mostly in dispersed rural areas, where access to services and opportunities for human capital formation is more limited. Extreme or high poverty conditions also expand to their municipal capitals considered as urban by definition.

The “Poverty Assessment. Strengthening Social Policy” (World Bank, 2004) indicates that since 2000 total poverty in El Salvador has declined slower than in the previous decade, while extreme poverty has barely changed. About half of Salvadorians living in rural areas are poor, a quarter of those live in mere subsistence, while 28.5 percent of the urban population is poor and only 9 percent is extremely poor.

In the last decade, access to basic services has improved particularly for urban areas, i.e. access to safe water, sanitary installations, and electricity. There has also been a reduction in isolation of poor, rural households. Despite progress, half of the poorest households still lack access to safe water, primarily in rural areas, 20 percent of poorest households lack adequate sanitation facilities with the consequent impact on family and environmental health, and about 40 percent lack access to electricity. Although access to roads has improved, average distances to paved roads are still 80-90 percent higher among the extreme poor than the non-poor in rural areas, whereas average distances to the nearest market are roughly one-third higher among the extreme poor than the non-poor (Poverty Assessment, 2004). Although geographic access is essential, cultural access to services and opportunities is equally important in the design of the proposed project,

Illiteracy. The gap between the urban and rural poor, and between men and women is also illustrated by the illiteracy rates. In 2004, the national average illiteracy rate for people 10 years old and older was 15.5 percent, but it was 30 percent for rural areas, as compared to 6.4 percent for Metropolitan San Salvador and 9.6 percent for urban areas. The national average illiteracy rate for women is 17.7 percent compared to 13 percent for men, but in urban areas it is 12.1 percent for women compared to 6.7 percent for men. The departments with the highest illiteracy rates are Morazan and La Uni6n in the Eastern region and Cuscatlan in the Central region holding both indigenous and non-indigenous peoples.

Health, It is estimated that 1.5 million people nation-wide have no access to basic PHC. Maternal mortality in rural areas is high (172/100,000, FESAL 2003), but it is estimated to be much higher in rural areas where only half ofchild deliveries get professional assistance.

Sanitation. Close to 60 percent of rural households do not have running water (EHPM 2003). The extreme poor households dedicate on average 14 percent of their time to fetching water (FUSADES, 2004). More than half of rural households live on dirt floors and more than 60 percent burn the solid waste in situ (DIGESTYC, 2004).

Education. Some 45 percent ofheads ofhouseholds suffering ofextreme poverty have less than third grade of schooling, which deem them as functionally incompetent to join the workforce.

99 Moreover, the inter-generational poverty circle can not be broken, as extreme poverty is most acute in households where the head ofthe household has between first and third grade.

Nutrition. Approximately 20 percent of children 0-5 years old suffer from stuntness and low weight. This tends to increase in indigenous communities, Le. Nahuizalco (FESAL 2003).

Civil Registry. It is estimated that 20-25 percent of people in isolated rural areas lack identity cards and/or birth certificates, which limits their ability to access services.

Remittances from overseas. While 24 percent of families in the 100 poorest municipalities receive remittances, 16.5 percent of families in municipalities with P do.

Demographic profile of El Salvador

The total population of El Salvador according to the National Household Survey 2004 (Encuesta de Hogares de Propbsitos Multiples, EHPM) is 6,874,926. Approximately 60 percent reside in urban areas. The Salvadoran population is young. Some 61.7 percent of the population is 30 years old and younger, and only 9.5 percent are 60 years old and older. Female population is more numerous (52.2 percent) than male (47.8 percent) population. Approximately 10 percent of the total population in El Salvador migrated in the last decade from rural areas of the 16 departments to urban centers, particularly to the metropolitan area of San Salvador, in search of jobs and services.

Box 1: Indigenous Population in El Salvador

It is difficult to know the exact number ofindigenous peoples in El Salvador, because (a) official data is not disaggregated by ethnicity, (b) except for few locations, indigenous, mestizosAadinos cohabitate in 13 out of the 14 departments, (c) there is continuous migration overseas and to urban areas. Dispersion and lack of cohesion may have contributed to a quick process of de- culturation and assimilation to the mainstream ladino culture.

According to the National Salvadoran Indigenous Coordination Council (CCNIS) and CONCULTURA (National Council for Art and Culture at MOE), approximately 600,000 or 10 percent of Salvadorian peoples are indigenous. The experience of the present assessment which included 8 “indigenous communities” was that only approximately 27 percent of inhabitants of those communities self-identify as indigenous, and 73 percent as mestizos/ladinos. In light of those findings, the evaluation team flags the need of a CENSUS to define the number, location and needs of Indigenous Peoples. If the findings of the present assessment are realistic, the actual number of indigenous could be roughly estimated between 150,000 and 200,000 (approximately 2.5 percent of the total population of El Salvador).

100 Indigenous Peoples UP) of El Salvador

Legal Framework

The present Salvadoran Constitution makes no specific provisions for the rights of Indigenous Peoples, or for their ability to participate in decisions affecting their lands, culture, traditions, or the allocation of natural resources. Also, El Salvador does not have official records of the indigenous population. That is why RED SOLIDARIA considers important to visualize the vulnerable population -children, women, handicapped and indigenous people. The census is the instrument used to identify this population and some of their needs within the poorest communities that RED SOLIDARIA is going to attend.

Salvadoran Indigenous People are descendants of the Pupils, a nomadic tribe of the Nahua of Central Mexico, the Mesoamerican Lenca and the South-American Chibcha. From the beginning ofthe Spanish conquest in El Salvador, the Indigenous and the Spaniards lived in the same areas. Racial mixing known as ‘mestizaje’ began in the XVI century. With the development of the indigo plantations in the early XVII century, many indigenous villages were destroyed, and many were forced to farm and work on these plantations.

There are currently three main indigenous groups in El Salvador, as follows:

The Nahua/Pipiles, presently the most numerous. They originally migrated from Central Mexico approximately in 900 AD (Tolteca Chichimeca Culture). They reside in the departments of Ahuachaphn, Santa Ana, Sonsonate, La Libertad, San Salvador, Cuscatlan, La Paz, Chalatenango, San Vicente. Their language “Nahuat” is the only indigenous language spoken in El Salvador by approximately 200 families. Under the Departmental Directorate of Education and with the support of CONCULTURA and CCNIS, a program for the ‘Revitalization of Nahuat-Pipil language’, has been promoted in five schools in Izalco and Nahuizalco, department of Sonsonate. A series of texts and materials have been developed in Nahuat, as the initial step towards a sought intercultural bilingual education program.

The Lencas, of Mesoamerican descent, reside in the Eastern departments of Usuluthn, San Miguel, Morazhn and La Uni6n. Although their language ‘Potdn Lenca’ is practically extinct (only few people speak it), few texts have been published in Pot6n Lenca with the support ofthe Lenca ofGuatajiagua Community Association “ACOLGUA” with the purpose ofpromoting and protecting the language and culture.

The Cacaopera (Kakawira) community resides in the department of Morazan. In few schools, the communities have taken advantage of the standard school Institutional Project (PIC) of the MOE to organize community rehabilitation programs ofthe language ‘Ulwa’, by having the few speakers or ‘caciques’ (elders) teach the community.

Few Chorti live in the department ofAhuachaphn, near Guatemala.

101 Mapping of Indigenous Peoples and Poverty

The first step into the inclusion of the indigenous peoples is to map the geographic location of municipalities where these vulnerable groups live, with the 100 poorest municipalities. Table 1 shows that out of the 66 municipalities identified by the Indigenous Profile and CCNIS as the municipalities with higher presence of indigenous peoples, only 26 (cursive bold) are among the 100 poorest in the country. The other 40 communities may be embedded in other municipalities.

Table A.lO.l: Municipal Location of Indigenous Peoples in El Salvador.

San Miguel Lolotique and Moncagua (cant6n El Jocotal). Morazan Cacaopera, Chilanga, Guatajiagua, San Simdn, Sensembra. La Uni6n Conchagua y Yucuaquin. TOTAL 25 indigenous communities included in poorest 32 municipalities.

The two largest indigenous organizations in El Salvador are the Center for Cultural Affairs (CONCULTURA) which is the only public organization overseeing Indigenous Affairs in the public sector (Ministry of Education), and the National Indigenous Salvadorian Coordinating Council (CCNIS) which is the national umbrella organization representing at least 11 of the 18 existing indigenous organizations6’. The CCNIS has grassroots organizations at the community level, which are powerful stakeholders influencing the behavior of indigenous peoples to either cooperate or to not cooperate with incoming programs.

69 Some members of CCNIS are the Association of Indigenous Aggrarian Workers (ADTAIS), National Association of Indigenous of El Salvador (ASNAIS), Indigenous Salvadorian Autochthonous Movement (MAIS), National Indigenous Nahuat- Pipil Association (ANINPI), National Association of Salvadorian Indigenous (ANIS), National Association of Holy Indigenous Land (ANITSA), Indigenous Kakaopera Community UKARTZUCULGA (GUARRIMA), the Institute for the Revitalization of Indigenous Ancestral Tradition (MIS), Indigenous Salvadorian Autochthonous Movement (MAIS).

102 Traditional organizations in the communities are important intermediaries to convey messages and disseminate information. The hard-to-reach families that are culturally-isolated typically look up to their indigenous leaders for guidance and approval. For this reason, the mobilization approach for entering indigenous communities should be culturally sensitive and respecthl of the existing social stratification. There are three social groups: (a) The Elders (‘ancianos’) conform the Council of Elders, which is the most respected traditional institution; (b) the “Alcaldia del Comzin” (ej. Izalco), an institution particular to El Salvador, where the mayor and regidores form the Municipal Indigenous Council, responsible for legal issues, nomination of Cofrados, control of the religious calendar and the finances of the Cofradia; and (c) the social networks of traditional promotors, midwives and traditional healers (sobadores). An element of discrepancy among indigenous organizations is that of ‘authenticity’.

General Results of the Social Assessment in 21 rural communities

Indigenous Invisibility. Identity crisis is an issue inside indigenous communities. Four (Cuisnahuat, Santo Domingo de Guzman, Guaymango and Guatajiagua) out of the eight ‘indigenous’ communities selected openly admitted their indigenous identity. In the other four, some people came forward and disclosed their indigenous heritage but others refused to do so, even within the same family. Being indigenous is perceived by some as a sign of ‘poverty’, ‘ignorance ’ and ‘backwardness ’ .

Poverty conditions. The main reason given for not accessing services (education, health, civil registry) is the cost spent in the process to obtain the services. People are aware that the CCT will not solve poverty problems, but that it will enable them to access the services mentioned above.

Social Risk of CCT and sustainability when funds are exhausted. As coverage of CCT is universal in the 32 extreme poor municipalities, leaders acknowledge that the biggest risk is for present law-abiding parents who send kids to school and keep health controls. A weaning strategy is needed for all parents when funds are exhausted.

Comparison of socio-economic conditions for IP and non-IP within communities assessed. Many poverty conditions tend to be similar for IP and non-IP as described below. The biggest discrepancies in the experience of poverty appear to be in the manner in which services are rendered; (some indigenous and non-indigenous people interviewed for this Assessment indicated that they felt indigenous people are often discriminated against).

The assessment found that the indicators with the biggest differences between IP and non-IP are the following: (a) Number ofpeople per household (1 3 people for indigenous and 6 for non-indigenous); (b) Illiteracy for children 42years old (78 percent for IP and 43 percent for non-IP) (c) Land tenure: 60 percent of IP interviewed live on communal lands, 35 percent rent, and 5 percent own land, while 95 percent ofnon-IP live on their own and 5 percent rent land;

103 (d) Materials of houses: for IP 80 percent of roofs made of zinc, plastic, cardboard and 20 percent tile; for non-IP, 85 percent tile and 15 percent zinc. But, for both groups, walls are mostly made ofbahareque (adobe), and 100 percent dirt floors.

However, other indicators are the same or similar for both groups (IP and non-IP):

The reported monthly wages for both groups is US$15 to $20 per family; They are mostly subsistence fannerdpeasants renting land for farming 3-6 monthdyear; They have no access to credit for fertilizer or seeds because they have no collateral; The traditional source of income from harvesting coffee and sugar cane, where all men/boys in working-age (10 yrs old and up) used to participate is diminished, as either farms have closed or wages are too low. Many male informants report their efforts (for 5- 10 years) to save enough to pay the ‘coyote’ to be able to migrate to the USA; e The traditional division oflabor is changing, however, menhoys continue to work mostly in agriculture, womedgirls do mostly housework and look after siblings; e The wage-winner is usually the man, but women decide priorities of expenditures and usually administrate wages; The houses ofboth groups interviewed have one room only; Neither group has potable water. Fetching water is responsibility ofwomen and children; 80 percent of IP catch water at the ground source, and 20 percent from river or public fountain; 35 percent of non-IP catch water at ground source, 45 percent from river and 20 percent from public fountain; e Sanitation. 70 percent of both groups have non-washable latrines, but most children do not use them; e Trash removal does not exist. 92 percent ofIP bury trash; 87 percent ofnon-IP burn it; e Electricity. Only about 9 percent of both groups have energy. Most people use candledtorches; e Communications. Between 40-50 percent of both groups have radios; 13 percent of indigenous and 30 percent ofnon-indigenous have TV.

Education Services. Most schools visited appeared to have little, if any, excess capacity. At the same time, while school principals did not know how many children do not attend primary school, it was estimated that only 77 percent of school-age children in assessed communities actually attend. Efforts are made by schools to control attendance ofthose registered by donating school materials to poor students, or through school assemblies and home visits. Most schools are multi-grade with two teachers (pre-K to sixth grade). Most primary schools are within walking distance, but middle and upper schools are 11 Km away on average, or 3 ?4hrs walking. Although primary school is free, parents said to spend US$35 per child per year for shoes, backpack, school supplies, etc.

104 The reasons cited for not sending children to school were: (a) poverty (41%), (b) parents’ lack of responsibility (24%), (c) parents’ demand of children’s time to work in farm or home (16%), (d) lack of shoes (8%), (e) risks when walking to school i.e.crossing rivers, gangs (5%), (f) hstration for lack ofMiddle school in community (4%); (g) illness, physical condition (3%). In all the assessed communities, it is the mother who is responsible for children’s education. Teachers’ attendance is a problem when teachers live in another community. Adult illiteracy is high for both indigenous and non-indigenous (75% for women and 50% for men).

The main organizations exercising social control for students and teachers’ attendance are the Community Education Association (ACE) in EDUCO Schools, and the Education Development Council (CDE) in traditional schools. Both organizations have legal personality and administrate funds for the school.

Essential Health Services. In each municipal capital there exists a Health Unit ofthe MOH. The average distance from the assessed communities is 11 Km or 3% hrs walking, or 30 minutes by car. Consultation is free, but a “voluntary donation” is enforced, which deters people from going to health units. However, the total cost of a common visit is calculated at $19.25 on average (transportation is $1.25, Acetaminophen and antibiotics is $10.00, lab work $8.00). Local food stores also sell medication. The average distance to a hospital is 16 Km at $20 by car. Transportation of a patient in a hammock by foot takes several hours. The pillars ofrural health seem to be the community-based network of health Promotors, midwives, AIN volunteers (consejeros voluntarios) “sobadores”, and traditional healers. Health NGOs are uncommon.

Reasons given by parents for not taking children to health provider for regular check-ups are: (a) poverty (40%) because they do not have means for transportation, medication, exams; (b) health units have no medication (15%); (c) parents’ irresponsibility (11%); (d) no means to pay the voluntary donation (10%); (e) distance; (f) health units only assist one child per visit (7%) ; (8) affraid of fever after shots (4%); (h) lack ofchildcare for children left at home (4%).

The main causes of morbidity in children and pregnant women. In children: Acute respiratory infections or ARI (37%); Diarrheic infection and vomit (31%); fever (10%); dengue (6%); dermatologic (5%). In pregnant and breastfeeding women: tension, headache, anguish (18%); vaginitis (17%); anemia, malnutrition (13%); cervical cancer (12%); gastritis, colitis (8%); URI (7%); random fever (7%); diarrheic infection (5%); heart disease (4%); urinary track infections (3%).

The main causes of mortality in children and pregnant women. In children: ARI (15%); diarrheic infection (15%); malnutrition (5%); genetic (3%); tifoid fever (2%); dengue (2%). In pregnant and breastfeeding women: cervical cancer (10%); heart disease (9”/0); cholera (3%); diabetes mellitus (3%); leukemia (2%); URI (2%); malnutrition YO); stomach cancer (1%); hemorrhage (1%).

Traditional treatment of common diseases in children. Traditionally, it is believed that there are three reasons for child illness: bad energy “mal de ojo”, food poisoning “empacho”, or parasites. The social assessment report describes at length the traditional preventive and curative practices ofthese illnesses by ethno-therapists. While some ofthem may be harmless and treated with widely accepted natural medicine, i.e. chamomile, rubbing with animal fat, cereal porrish,

105 other cures may be harmful particularly for newborn babies, i.e. the manual raising of the ‘mollera’ through the mouth in infants. Training the traditional network to promote good practices and discourage questionable ones is important.

Traditional treatment of pregnant women. The midwife network identifies and provides pre- and post-natal care. The assessment report describes the traditional health care model which includes good practices such as the community-based support for women, as well as more questionable ones such as rubbing the abdomen of the mother on the 7th month, or repositioning the baby during the 8th month. Training midwives to promote good practices and discourage questionable practices is important.

The AIN Program. From the 25 communities of the sample, 16 communities implementing AIN were selected. Except for one community (Guatajiagua) parents did not know about AIN, as the program was introduced six months ago, and they are in the planning stages for selecting (by the community) and training volunteers. In Guatajiagua, the volunteers were trained for 5 days to identify signs of malnutrition, educate parents on nutrition issues. They did a diagnosis and risk map of the community. Volunteers are monitored by the Municipal AIN Coordinator and health promoter (promotor de Salud) andlor the local health team. Children <2 yrs old are weighed every month, and community assemblies are carried out every six months.

Perceptions with regard to quality of health services in MOH Units. Interviewees evaluated health units and doctors on average as ‘good’ but some ‘bad’, while promoters received consistently a ‘very good’ and nurses a ‘so so’. In some municipalities doctors and nurses are accused of mistreating patients, refusing to treat or delaying treatment of indigenous patients till the end of the day. Overall, the health-seeking behavior of the extreme poor indicate that, faced with illness, self-medication with traditional medicine or a combination of pharmaceutical and herbal medicine is the first step. If that does not work, they look for the health promoter or midwife. If their advice does not work, they approach the health unit.

Civil Registry. The general perception is that civil registry in assessed communities has improved over the years. The father is usually responsible for obtaining birth certificates for newborn babies. However, reality shows that 25.8 percent of homes are headed by women because they are single or their husbands are overseas. Many women interviewed don’t feel the need to obtain a DUI, as their husbands do all the family transactions. The municipality does not have a record oforphan children. Reasons why people don’t have birth certificates and ID (DUI) form a vicious circle.

The average cost to obtain a DUI is calculated at US$20.00 which includes: transportation, compensation for one-day wages, and payment for filling out the form. Other costs may include an up-dated, renewed or modified birth certificate (US$10.30), the presence of parents or witnesses, or law suits (US$70.00 to US$700).

The main reasons for not obtaining birth certificates for both indigenous and non-indigenous are: (a) poverty (33%); although the service is free of charge a fine of $2.86 is applied after 15 days of date of birth, plus transportation ($1.25) and inability to afford time-off from work; (b) poor planning on the part of the father (32%); (c) parents do not have DUI to be able to register

106 (13%); (d) privacy, single adolescent mothers (5%); (e) don’t want to pay fine of $2.86, or extension of birth certificate $1.20; (f) distance (5%); (g) father’s alcoholism (4%); (h) unawareness (4%).

The main reasons for not obtaining DUI for both indigenous and non-indigenous are: (a) poverty (34%); (b) distance to Department capital where DUI center operates is between 3-4 hours by bus which requires leaving home at 3:OO or 4:OO am or sleeping in the city (14%); (c) unawareness of importance ofDUI (12%); (d) do not have birth certificate (12%); (e) expensive multiple visits to DUI center (8%); (0 physical reasons i.e. scars, finger missing (7%); (g) orthographic errors, names arbitrarily changed by the municipal secretary because indigenous names may be prohibited; corrections require a law suit (5%); (h) registrations disappeared in fires during the conflict (4%); (i)religious reasons, i.e. the bar code is believed to be “sign ofthe devil” (mama de la bestia, 666).

Recommendations

Participation, Inclusion and Gender. In order to ensure participation of all community members, non-indigenous as well as indigenous, consistent with the plans of the Red Solidaria, the assessment highlighted the importance of carrying out a protocol for the insertion into the communities. A first and important step would be an Education, Information and Dissemination campaign (workshops, media) at the departmental, municipal and community levels, where municipal and community authorities, local associations, CBOs, local indigenous organizations, school councils, community health networks, etc. learn about the opportunities to participatebenefit from the programs. This could be integrated as part of the Communication Strategy being developed under the Red Solidaria. As a result, the organizations knowledgeable of the programs would be able to participate more efficiently in the Committees formed by the Red Solidaria. Moreover, an important network of civil society would be formed to exercise social control, aim at transparency, and ensure programs reach all those intended.

For the Conditional Cash Transfer Component

1. As part of the Communications Strategy of the Red Solidaria, develop a Module on “Interculture and Indigenous Peoples ofEl Salvador” which includes an IEC strategy. 2. As part of the Communications Strategy of the Red Solidaria, carry out workshops for the central and regional level staff and local authorities working on Red Solidaria programs, to introduce them into Intercultural Issues and dealing with poor and isolated communities. 3. The NGOs hired to implement the CCT should enjoy a credible reputation in the assigned municipalities. They should be identified as RED SOLIDARIA not as NGOs. 4. Although the mothers will administrate the funds, both father and mother should sign the contract, to encourage ‘responsible fatherhood’. Single fathers or mothers may be supported by a grandparent or someone else. 5. In municipalities where local people’s participation is a particular concern, representation of Community Organization (ADESCO, ACE, CDE, or other association) should participate in both

107 the Municipal and Community committee to ensure they are able to effectively encourage and support full participation ofeligible families in the RED SOLIDARIA.

For the Expansion of Provision of Basic Health and Nutrition Services

1. The evaluation recommends keeping activities that entail family expenses to access services at a minimum. To that end, bring services closer to the community, such as AIN and itinerant health teams.

2. The SIBASIs should be more involved with AIN.

3. Although AIN volunteers identify malnutrition risk, communities recommend a stronger link between AIN and health services that manage risk.

4. Within the Participation scheme proposed, it is recommended to consider existing community- based health organization in the selection process to support the community association which will accompany the NGO hired by RED SOLIDARIA.

5. Improve the quality and quantity of the supply of services and medication in health units, to justify long walks (3 to 4 hours) with children. Norm attention to assist mothers coming from far away ‘first’, and assist all the children, not just one per family.

6. As part of the Communications Strategy of the Red Solidaria, carry out an Anthropological Study of Knowledge, Attitudes and Practices in Health and Nutrition in Indigenous Communities, to help understand current practices, identify and promote good practices.

7. As part of the Communications Strategy of the Red Solidaria, elaborate a training Module on “Intercultural Health and Nutrition” for Health Staff (MDs, nurses, auxiliaries, promoters) and the local community health network (AIN volunteers, midwives, healers).

For the Strengthening of Legal Access to Services through Expanding the Civil Registry

1. Carry out an information, education and communication strategy through the media (only 50% have radios) and community leaders to promote the right to and usefulness of birth certificates and ID cards.

2. Extend for free both birth certificates and DUI to people in the 100 extreme poor municipalities of the Red Solidaria; and avoid any transactions which may entail costs, as most people will not be willing to spend money to register.

3. Launch the DUI mobile team. Bring registry service to people to avoid mobilization expenses.

4. Provide sensitivity training to National Registry Offices (RNPN) in all Departments and establish clear set of rules to avoid prejudice and exclusion of citizens for physical handicaps

108 (lacking a finger, scarred finger), for dislike of indigenous name or last name. Also, birth certificates should not require up-dating.

5. It is recommended that the RED SOLIDARIA create links with local indigenous organizations to assist the NGO in the identification of those who lack birth certificate or DUI. The elders, in particular, can best be persuaded by their indigenous leaders.

SOCIAL INCLUSION AND GENDER PLAN

Gender Strategy

1. Given that the burden of children’s health and education rests on women, it’s recommended that both spouses share all responsibilities of Red Solidaria. Fatherhood responsibilities should thus be emphasized. 2. It is agreed that women should be the recipients of the CCT funds, however, the spouse should be encouraged to be present. 3. Although traditionally the father is responsible for obtaining birth certificates, women should be encouraged to leam about the process and be sure to get her own DUI. 4. To enable women to attend training sessions, the Local Community-based Association should be encouraged to arrange childcare by a volunteer, for children 0 to 5 years old, while the mother participates in training. 5. Training of municipal staff on gender issues will enable to apply a gender focus to all activities. 6. All activities to nominate people should have a gender focus to include both men and women.

INDIGENOUS PEOPLES PLAN

The World Bank Operational Policy 4.10 calls for informed consultations and the inclusion of indigenous peoples from the initial phases ofproject design, through implementation and project monitoring. To that end, the social assessment included consultations with indigenous leaders, stakeholders and indigenous families to ensure their participation in a culturally adequate manner. Consistent with the OP 4.10 an Indigenous Peoples Plan as described below has been agreed with the GOES and will be included in the Operational Manual.

COMPONENT 1: Conditional Cash Transfers

1.1 It is recommended that the census to be carried out for Red Solidaria’s beneficiary registry include some questions to identify indigenous population, as the following:

Do you consider yourself indigenous? Yes No If the answer is YES, what group do you belong to? .Do you speak an indigenous language at home? Yes No If the answer is YES, what language? Are you a member of a local indigenous organization? Yes No If the answer is YES, what organization to you belong to?

109 1.2 As part of the Communications Strategy of the Red Solidaria, develop a Module on “Interculture and Indigenous Peoples ofEl Salvador”.

1.3 Training on “Inter-culture and Indigenous Peoples of El Salvador” to be taught to different levels of stakeholders of Red Solidaria (operational staff, NGOs, inter-institutional coordinators) at the central, departmental and local levels.

COMPONENT 2: Expanding Provision of Essential Health and Nutrition Services

2.1 As part of the Communications strategy of the Red Solidaria, carry out an Anthropological Study of Knowledge, Attitudes and Practices in Health and Nutrition in Indigenous Communities, to help understand current practices, identify and promote good practices.

2.2 Also, as part of the Communications strategy of the Red Solidaria, elaborate a training Module on “Intercultural Health and Nutrition” for Health Staff (MDs, nurses, auxiliaries, promoters) and the local community health network (AIN volunteers, midwives, healers).

2.3 Training workshops on Intercultural Health (and AN-C) for health staff of Health Units in 35 municipalities with indigenous peoples. The workshops are taught to the local community network that includes MDs, nurses, promotors, community health agents, sobadoves, midwives. Some topics are: . Indigenous Cosmovision ofHealth . Utilization oftraditional medicine and common treatments Integration oftraditional health agents in the public/private health systems

COMPONENT 3: Strengthening Legal Access to Services through Expanding the Civil Registry

3.1. Sensitivity training for all National Registry Offices of 35 municipalities with indigenous peoples, so that they treat indigenous peoples with respect, and they accept indigenous names and last names as requested.

3.2 Issue birth certificates and DUI free ofcharge, for all indigenous children and eligible adults in their own communities, through the DUIMOBILE.

110 Annex 11: Project Preparation and Supervision EL SALVADOR: Social Protection project

Planned Actual PCNreview 09/14/2004 04/22/2005 Initial PID to PIC 06/08/2005 Initial ISDS to PIC 06/10/2005 Appraisal 08/08/2005 08/22/2005 Negotiations 09/12/2005 09/12/2005 Board/RVP approval 10/27/2005 10/27/2005 Planned date ofeffectiveness 02/01/2006 Planned date ofmid-term review 06/01/2008 Planned closing date 03/01/2010

Key institutions responsible for preparation of the project: Technical Secretariat ofthe Presidency, and Social Investment and Local Development Fund (FISDL).

Bank staff and consultants who worked on the project included:

Name Title Unit Andrew D. Mason Task Manager LCSHS Manuel Salazar Sr. Social Protection Specialist LCSHS Ales s andr a Marini Young Professional YPP Jesus Maria Femindez Sr. Public Health Specialist LCSHH Luis Prada Procurement Specialist LCOPR Patricia MacGowan Sr. Procurement Specialist LCOPR M6nica Lehnhoff Procurement Analyst LCOPR Manuel Vargas Sr. Financial Management LCOAA Specialist Fabiola Altimari Legal Counsel LEGLA Aracelly Woodall Project Costing Specialist LCSHD Ximena Traa-Valarezo Consultant LCSHD Jorge C. Barrientos Consultant LCSHD Ariadna Garcia-Prado Consultant LCSHH Nancy Gillespie Consultant LCSHD Claudia Isem Team Assistant LCSHD

Bank funds expended to date on project preparation: 1. Bank resources: US$184,742.82 2. Trust funds: US$149,257.46 3. Total: US$854,742.82

Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$O.OO 2. Estimated annual supervision cost: US$80,600.00

111 Annex 12: Documents in the Project File EL SALVADOR: Social Protection project

Country Documents produced by the Government:

1. El Salvador - Manual to develop the extension ofhealth services in the affected areas by the earthquakes of 2001 - Ministry of Health - RHESSA Project, 2005. 2. El Salvador - Institutional Analysis of the Red Solidaria Program in El Salvador - Final Report - Veronica Silva, June 2005. 3. El Salvador - Micronutrients Component Evaluation within the AIN Strategy - Ministry ofHealth - 2004. 4. El Salvador - Report on meetings of the AIN Strategy Evaluation with SIBASIS and ETZ -April 2005. 5. El Salvador - Growth and Development through Community Participation Promotion: “Comprehensive Care in Nutrition in the Community-AI”’ - 2005.

Country Documents produced/commissioned by the World Bank:

1. El Salvador - Country Assistance Strategy - January 18, 2005. 2. El Salvador - Poverty Assessment: Strengthening Social Policy - June 30, 2004. 3. El Salvador - Development Policy Loan - January 21, 2004. 4. Central America - Social Safety Net Assessments: Cross-country Review ofPrincipal Findings - Jose Marques, August 2003.

112 Annex 13: Statement of Loans and Credits EL SALVADOR: Social Protection project

Difference between Last ISR expected and actual Supervision Rating Original Amount in USS Millions disbursements

Project Purpose Development Implementation Fiscal IBRD IDA Cancel. Undisb. Orig. FIm. ID Objectives Progress Year Rev’d

PO649 19 SV JUDICIAL MS MS 2003 18.20 0.00 0.00 17.38 12.16 0.00 MODERNIZATION PROJECT PO67986 SV-EARTQUAKE EMERGENCY REC. & MU MU 2002 142.60 0.00 0.00 139.00 -3.59 0.00 HEALTH SER PO50612 SV EDUCATION REFORM S S 1998 88.00 0.00 0.00 15.19 15.19 15.18 PO41680 SV SECONDARY S S 1998 58.00 0.00 0.00 9.40 9.40 0.00 EDUCATION PO07 164 SV PUBLIC SECTOR S S 1997 24.00 0.00 0.00 5.95 5.95 3.11 MODERN PO93133 SV (CRL2) PROGAM. BROAD S S 2005 100.00 0.00 0.00 100.00 0.00 0.00 PO07 174 SV LAND ADMINISTRATION HS S 2005 40.20 0.00 0.00 40.20 0.00 0.00 PO64910 SV ENVIRONMENTAL SERV nia nia 2005 5.00 0.00 0.00 5.00 0.00 0.00 Total: 476.00 0.00 0.00 332.12 39.11 18.29

EL SALVADOR STATEMENT OF IFC’s Held and Disbursed Portfolio As of04/30/2005 (In US Dollars Millions)

Held Disbursed

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2004 Banco Agricola 50.00 0.00 0.00 0.00 43.50 0.00 0.00 0.00 Banco Uno-El Sal 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 CAESSIEEO 41.74 0.00 0.00 66.45 28.32 0.00 0.00 44.09 2002104 CALPIA 4.50 0.00 5.00 0.00 4.50 0.00 5.00 0.00 1998/03 CUSCATLAN-ES 0.00 0.00 15.00 0.00 0.00 0.00 15.00 0.00 2004 Confia AFP 0.00 7.50 0.00 0.00 0.00 6.73 0.00 0.00 2004 Metrocentro 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 1999 SEF IMACASA 0.00 0.16 0.00 0.00 0.00 0.16 0.00 0.00 Total portfolio: 13 1.24 7.66 20.00 66.45 101.32 6.89 20.00 44.09

113 Annex 14: Country at a Glance EL SALVADOR: Social Protection Project Latin Lower- POVERTY and SOCIAL El America middle- Salvador 8 Carib. Income Development diamond' 2003 Population, mid-year (millions) 6.5 534 2,655 Life expectancy GNI per capita (Atlas method, US$) 2,200 3,260 1,480 GNI (Atlas method, US$ billions) 14.4 1,741 3,934 Average annual growth, 199743 T Population (%) 1.7 1.5 0.9 GNI Gross Labor force (%) 2.9 2.1 I.2 per primary Most recent estimate (latest year available, 199743) capita enrollment Poverty (% of population below national poverty line) Urban population (% of total population) 59 77 50 Life expectancy at birth (years) 70 71 69 i Infant mortality (per 1,000 live births) 33 28 32 Child malnutrition (% of children under 5) 12 11 Access to improved water source Access to an improved water source (% ofpopulation) 77 86 81 Illiteracy (% ofpopulation age 15+) 20 11 10 Gross primary enrollment (% of school-age population) 112 129 112 -E/ Salvador Male 114 131 113 Lower-middie-income group Female 109 126 111 KEY ECONOMIC RATIOS and LONG-TERM TRENDS I983 1993 2002 2003 Economic ratios' GDP (US$ billions) 3.5 7.0 14.3 14.4 12.1 16.6 Gross domestic investmenVGDP 18.6 16.4 Trade Exports of goods and services/GDP 24.5 19.4 26.7 27.6 Gross domestic savings/GDP 6.6 3.8 I.9 0.8 Gross national savings/GDP 5.6 15.1 13.7 13.0 T Current account balance/GDP -5.6 -7.5 -2.7 -3.7 Jomestic Investment Interest payments/GDP 2.0 1.? 1.5 2.0 savings Total debffGDP 49.8 29.2 40.8 43.8 Total debt service/exports 19.8 13.9 7.8 8.5 Present value of debVGDP 43.5 1 Present value of debVexDorts 106.5 Indebtedness 1983.93 199343 2002 2003 200347 (average annual growth) GDP 2.8 3.2 2.1 2.0 3.9 -El Salvador GDP per capita 1.3 I.3 0.4 0.2 1.8 Lower-middle-incomegroup Exports of goods and services 0.4 10.6 5.7 3.4 5.0

STRUCTURE of the ECONOMY

(% of GDPJ Agriculture 31.2 14.0 Industry 22.3 28.2 Manufacturing 16.6 22.4 23.5 24.5 Services 46.5 57.8 61.0 58 7 Private consumption 77.5 87.6 General government consumption 15.8 86 8.2 11 3 imports of goods and services 29.9 34.1 41.2 43.4

1983-93 lgg3-03 2o02 2003 Growth of exports and Imports (Oh) (average annual growth) Agriculture 0.7 0.9 -0.5 6.0 30 T Industry 30 48 28 48 20 Manufacturing 32 49 25 40 to Services 33 30 23 -0 2 Private consumption 52 36 13 36 General government consumption -41 19 -7 2 4 2 -10 Gross domestic investment 8.8 2.9 -1.5 0.5 -Exports +Imports Imports of goods and services

Note: 2003 data are preliminary estimates. This table was produced from the Development Economics central database. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

114 El Salvador

PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 lnflatlon (Oh) Domestic prices (% change) I Consumer prices 13.3 18.6 1.9 2.9 Implicit GDP deflator 10.6 12.8 1.3 -1.2 Government Finance (% of GDP, includes current grants) Current revenue 11.8 12.4 Current budget balance 0.4 0.6 I -GDPdeflator 'O'CPI I Overall surplus/deficit -3.9 -3.7

TRADE 1983 1993 2002 2003 Export and Import levels (US$ mill.) (US$ millions) Total exports (fob) 605 1,234 1,357 Coffee 235 107 5"00 T 4,000 cotton 35 44 Manufactures 309 1,073 1,080 3,000 Total imports (cif) 1,924 4,082 3,926 2 000 Food 44 1 1.198 Fuel and energy 124 175 1,000 Capital goods 565 883 906 0 97 98 99 00 01 02 03 Export price index (1995-100) 68 55 55 Import price index (1 99511 00) 88 83 84 Exports w Imports Terms of trade (1995=100) 77 66 66 i

BALANCE of PAYMENTS 1983 1993 2002 2003 Current account balance to GDP (%) (US$ millions) Exports of goods and services 912 1,273 3,810 3.980 IT Imports of goods and services 1,085 2,487 5,887 6,255 Resource balance -173 -1,213 -2,077 -2,275 Net income -131 -129 -287 -325 Net current transfers 108 823 1,980 2,069 Current account balance -1 96 -519 -384 -531 Financing items (net) 392 663 260 550 Changes in net reserves -195 -144 124 -19 Memo: Reserves including gold (US$ millions) 645 1,623 1,607 Conversion rate (DEC, local/US$) 2.8 8.7 8.8 8.8

EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) j Composition of 2003 debt (US$ mill.) Total debt outstanding and disbursed 1,745 2,033 5,829 6,305 IBRD 106 220 371 372 372 IDA 26 22 15 14 991 14 Total debt service 202 294 453 514 IBRD 14 32 46 54 IDA 1 1 1 1 Composition of net resource flows Official grants 158 61 1 107 Official creditors 294 317 164 78 Private creditors -1 9 -3 1,211 310 Foreign direct investment 28 16 208 Portfolio equity 0 0 0 World Bank program Commitments 0 93 143 0 A. IBRD E - Biiateral

Disbursements 7 51 63 38 B ~ IDA D - Other multilateral F. Private Principal repayments 6 18 28 38 C- IMF G - Short-term Net flows 1 33 35 0 Interest payments 8 15 19 17 Net transfers -8 18 17 -17

Note: This table was produced from the Development Economics central database. 9/15/04

115 M .I.c, .II ed

.Ia 0 .I 5 h 0 E

04 93$ 3 3 v) 9 pa $ e Annex 16: Essential Health and Nutrition Services EL SALVADOR: Social Protection Project

Service Delivery Package for Health Services Coverage Extension in the Rural Area

The provision model that will be developed in each village entails a process of work with the community and is administered in two phases:

1. Planning and health management in the community that will include:

a. Participatory diagnosis of community health. Entails a survey of the family card through a family visit; preparation of the risk map conducted by the health promoter and leaders in their community and the preparation of a community health summary, analyzed in a community assembly where decisions to tackle community health problems are taken. b. Community health prioritization and action program. The community, the health promoter, the assigned health unit staff, and the provider’s health team decide how to tackle the analyzed and prioritized health problems. Based on that, they prepare their community health action plan and epidemiological community monitoring, as guide for the health work of the promoter, the community and the healthy brigade that will periodically take care ofthe community’s health needs. c. Community participative evaluation and social controller. This phase of the process will facilitate for the organized community along with the health promoter, healthy brigade, health unit, and corresponding Integrated Basic Health System to plan evaluation meetings to allow feedback into the management process to ensure efficient development ofthe health programs in the community. In addition to this and throughout the whole process, a committee formed by community leaders will assume the responsibilities and functions of the social controller in health, providing the necessary training and tools contained in the guide to facilitate the participation and social controller in health. d. Implementation of activities/community projects development in support of health. In this phase, the various committees and key actors in the process will direct their actions based on the activities and projects included in the community health operational plan prepared in a participative manner.

2. Direct provision of services, as detailed below:

a. Home visit for integrated family care: 0 Family risk identification (according to family card); 0 Clean house promotion; 0 Vectors control; 0 Monitoring and promotion of environmental health with emphasis on adequate garbage and sewage disposal and safe water consumption;

119 Safe use ofpesticides; Zoonoses (to support monitoring and vaccination of dogs and cats as well as monitoring and control ofrodents); Epidemiological community monitoring (VECO); Appropriate detection and reference to the corresponding level of intra- family violence and child mistreatment cases; Sexual and reproductive health education; Promotion ofrecreational and sport activities; Promotion of fortified food consumption; Promotion ofinitial and kindergarten education, and school enrollment; Advice on prevention of home accidents and extemal cause injuries (high falls, bums and injuries related to motor vehicles). b. Integrated care by age group: I. Newborn care in accordance with MSPAS guidelines: 1) All newboms must be visited in the first 24 hours after birth or as soon as the mother returns to the community from the hospital; 2) Newbom registration before 28 days of life; 3) Evaluate the presence of waming signs and make recommendations on basic newborn care in accordance with the community’s AIEPI basic table and counseling slides on newborn basic care and waming signs; 4) Newbom vaccination with BCG; 5) Newbom nutritional assessment; 6) Administration ofvitamin A, 50,000 UI; 7) Promotion ofexclusive breast-feeding during the first 6 months oflife; 8) Morbidity monitoring in accordance with health and nutrition risk and appropriate reference; 9) Treatment and basic care monitoring for at-risk newboms, treated at second and third level ofcare.

11. Care for children under 1 year in accordance with MSPAS guidelines: 1) Registration (if not previously registered) and subsequent checkups; 2) Community-level nutritional care for boys and girls under 1 year, through AN-C strategy: Weigh and determine growth tendency using weight-for-age graph and minimum expected weight table. If the child presents inadequate growth, a checkup should be arranged in one month. 0 Evaluate child feeding practices and provide nutritional counseling, with emphasis on exclusive breast-feeding of children under 6 months and beginning of complementary food for children over 6 months, in accordance with nutritional counseling slides. 0 Micronutrients supplement: iron, zinc and vitamin A. If the child is taking any multivitamin, do not administer vitamin A. 3) Vaccination in accordance with PA1 scheme; 4) Iodine supplement for children diagnosed with goiter;

120 5) Evaluate psychomotor development in accordance with the developmental assessment simplified scale; 6) Early detection ofdisabilities, timely reference and monitoring; 7) Monitoring dental eruption of temporary parts and timely reference to the dentist; 8) If presenting morbidity, care should be given in accordance with the care guide for childhood-prevalent illnesses (AIEPI).

111. Care for children from 1 to under 5 years in accordance with MSPAS guidelines: e Registration and subsequent checkups; e Nutritional status assessment and interpretation and corresponding approach; e Cephalic circumference assessment and corresponding approach (for children under 2 years); e Assess feeding practices and provide nutritional counseling; e Assess psychomotor development in accordance with the developmental assessment simplified scale; e Provision ofiron, vitamin A and zinc according to age; e Vaccination in accordance with PA1scheme; e Oral health promotion, dental eruption monitoring and timely reference according to needs; e Early detection ofdisabilities, timely reference and monitoring; e If presenting morbidity, care should be given in accordance with the care guide for childhood-prevalent illnesses (AIEPI); e Detection, reference and monitoring ofreportable diseases; e Supply of anthelmintic.

IV. Care for children from 5 to under 10 years in accordance with MSPAS guidelines: Registration (if not previously registered) and subsequent checkups once a year; Review vaccination scheme and complete according to case; Measure height and weight and determine nutritional status in accordance with weight-for-height graph; Evaluate feeding practices and provide nutritional counseling according to nutritional status; Micronutrients supplement according to guidelines; Iodine supplement for children diagnosed with goiter; Administer parasiticide dose every 6 months (ensure that it has not been previously administered); Oral health promotion, surveillance of dental eruption and timely reference according to needs; Dental topical fluorine application every 6 months in municipalities with drinking water deficit;

121 Early detection of disabilities, timely reference and monitoring (with visual and hearing emphasis); Detection, care and timely reference of patients with respiratory symptoms, prevalent diseases such as tuberculosis, malaria, dengue and ITS; Advice and guidance on accident prevention.

V. Teenagers > 10-19 years in accordance with MSPAS guidelines: 0 Comprehensive care consultation once a year; Nutritional status assessment; 0 Sexual health and reproductive education; 0 Provision offolic acid and iron for teenage girls; Immunization according to scheme (PAI); Oral health education; Detection, care and timely reference of patients with respiratory symptoms, prevalent diseases such as tuberculosis, malaria, dengue and ITS; Iodine supplement if diagnosed with goiter; Advice on prevention ofextemal cause injuries.

VI. Women of childbearing age (10-49 years) in accordance with MSPAS guidelines: 0 Prenatal care: > Early registration (before 12 weeks of gestation) and subsequent pregnancy checkups including: a. Obstetric risk classification and timely reference; b. Assessment and interpretation ofnutritional status; c. Nutritional counseling; d. Prescription of laboratory tests according to prenatal profile, sampling and delivery to the establishment for processing and response to the woman; e. Design and implementation ofdelivery plan based on delays:

Delay I: 1. Counseling to the pregnant woman, family, midwife and community; 2. Coordination with the area’s midwife.

Delay 11: 1. Transportation of the pregnant woman for delivery care to first level establishments or second level hospital.

Delay 111: 1. Reference for delivery care at second level hospital or health unit that provides delivery care (qualified staff: physician and nurse);

122 2. Timely reference and monitoring of complications according to guidelines.

9 Preparation ofobstetric risk map; 9 Immunization according to the Extended Immunization Program scheme; 9 Provision of folic acid and iron according to guidelines; 9 Oral health education and reference to the nearest establishment for dental care; 9 Counseling on early attachment and exclusive breast-feeding; 9 Counseling and reference to conduct free HIV/AIDS tests in MSPAS’ clinical laboratories.

e Comprehensive care to the puerpera: 9 Puerperal control for warning signs detection and timely reference according to guidelines; 9 Promotion of family planning counseling; 9 Provision ofiron, folic acid and vitamin A; 9 Promotion, protection and support to exclusive breast-feeding for children under 6 months; 9 Promotion ofcomplementary feeding starting at 6 months; 9 Nutritional assessment and counseling on feeding during the breastfeeding period.

e Care for women of childbearing age: 9 Early cervical cancer detection with emphasis on risk groups of women 30-59 years (sampling and monitoring of reading and response ofcervical-vaginal cytology) and reference according to case; 9 Promotion of breast self-examination, risk detection and timely reference; 9 Provision ofiron plus folic acid; 9 Registration, subsequent control and supply in family planning; 9 Promotion and reference for permanent methods; 9 Counseling on responsibility and spacing of children according to family planning guidelines; 9 Immunization ofwomen ofchildbearing age according to PAI; 9 Oral health promotion.

VII. Comprehensive health care for adults 20-59 years according to MSPAS guidelines: 9 Annual comprehensive care consultation including screening for HTA and diabetes detection; 9 Sexual and reproductive education with emphasis on the prevention of STI/HIV/AID S ; 9 Self health care education; 9 Immunizations according to PA1 guidelines;

123 9 Detection, care and timely reference of patients with respiratory symptoms, prevalent diseases such as tuberculosis, malaria, dengue and ITS.

VIII. Comprehensive health care for older adults (60 years and older) according to MSPAS guidelines: 9 Annual comprehensive care consultation including screening for HTA and diabetes detection; 9 Sexual and reproductive education with emphasis on the prevention of S TI/HIV/ AID S ; 9 Self health care education, with emphasis on nutritional education, physical and mental activity; 9 Immunizations according to PA1 guidelines; 9 Detection, attention and timely reference of patients with respiratory symptoms, prevalent diseases such as tuberculosis, malaria, dengue and ITS. c. Comprehensive nutritional care in the community (AIN).

Nutritional problems among pregnant women and the infant population of El Salvador encompass major dimensions, with significant impact on the physical and mental development which limits the human development as well as the country’s potential. For such reason, the AIN strategy is based on the community that promotes health and nutrition with greater monitoring by tracking weight gain of pregnant women and children under 2 years. The strategy is developed by volunteers (parents), health promoters and the local health team. AIN promotes early identification of health and nutritional problems among children under 2 years and pregnant women in order to develop immediate, low-cost actions for families as well as the health system.

Weight monitoring is the basis to develop health and nutrition actions: volunteers, who remain in their communities for 24 hours, represent a point of entry to the health services network as part of the health reform based on a prevention model where the family and the community are important actors. The following activities should be carried out for the AIN implementation:

- Training for health promoters and health team. - Identification, training and monitoring ofnutritional counselors, with a three-volunteer minimum for each village. - Monthly sessions on weight monitoring for children under 2 years and pregnant women. - Semiannual meetings with the whole community and local authorities to discuss health and nutritional problems. - Continuing education meetings for volunteers.

124 Annex 17: Support to Red Solidaria (ES-L1002)

Effective School Networks7'

I. BACKGROUND

1.1 In the last 12 years, the country has made important efforts to improve equity regarding educational opportunities for its people. In fact, the gaps in average schooling and illiteracy have tended to decline in the youngest generations (population 15-24 years of age), giving more advantages to the poorer sectors and rural areas. Also, there are no differences in average schooling and illiteracy between young men and young women (15-24 years). Nevertheless, inequalities are still very major. Boys and girls ofthe poorer sectors (living mainly in rural and urban marginal areas) have lower school attendance, tend to repeat more grades and to drop out ofthe system without concluding their basic education. Specifically, the non existence of services to meet the demand of higher grades in basic education (third cycle); the inefficiency caused by small student group size in some classrooms; the high repetition indexes, especially in first grade (2004, 15.2 percent) and the over-age in first grade (1 1 percent), are warning signals of the poor quality of the educational system in these areas. The low kindergarten net enrollment rate for 6-year-olds (44.1 percent at the national level) should be added to the abovementioned conditions.

1.2 To solve these problems the Government of El Salvador has launched the Programa Red Solidaria (Solidarity Network Program) to be implemented throughout all the social sectors. Within the framework of the Plan Nacional de Educacidn 2021 (National Education Plan 2021), the Ministry of Education has begun to develop a strategy of intervention in the 100 municipalities selected by the Programa Red Solidaria, named Effective School Networks (Redes Escolares Efectivas or ME). This strategy is a modality of cooperative work between teachers, parents and students in order to improve access and quality of learning in those areas of the country. This effort will be financed with own resources and by an Inter-American Development Bank credit in the amount ofUS$S5 million.

1.3 The REE program will increase the schooling level of the population, mainly in the 100 municipalities with higher levels of poverty. From the legal standpoint, it will reintroduce the responsibility of providing free education to kindergarten, basic education and special education students.

'O Consists in associating a group of schools located in a single geographical area for all cycles of basic education, thus allowing to increase school coverage and to improve the quality of leaming that these schools provide.

125 11. GENERALOBJECTIVE

2.1 To expand opportunities for quality access and completion from kindergarten (with emphasis on 6-year-olds) up to grade 6 in the 100 targeted municipalities. Appropriate access implies that boys and girls are registered in the corresponding age and continue studying until they complete their basic education. This implies the achievement of an effective transition ofboys and girls, avoiding repetition, over-age and desertion. As part ofthis initiative priority will be given to kindergarten for 6-year-olds and grades 1 to 6 of basic education.

2.2 The increase in schooling will also be impacted by the youth or adults who never went to school or who dropped out of it prematurely without completing their education. Thus, the Networks’ work plan will develop actions to literate and to bring flexible basic education opportunities to youth and adults of the selected municipalities, giving priority to the youngest groups.

111. OUTCOMEINDICATORS

3.1 Increase the net rate of schooling in each grade (from 6-year-old children in kindergarten up to grade 6).

3.2 Increase the literate population average (by segment age: 15-24; 25-29 years) from 88 percent (2002) to 96 percent (2009).

3.3 Reduction of the repetition rate in basic education, from 8.5 percent (2002) to 4.2 percent (2009).

3.4 Increase in percentage ofboys and girls with above-average performance in language and mathematics tests (grades 3 and 6).

Iv. LINESOF ACTION’l

4.1 This component will target its actions in 100 rural municipalities selected by its high poverty indexes and educational lag. The proposal consists of developing an organization and association scheme of educational demand (1 15 Effective Schooling Networks) among a group of 8 to 12 schools, with broad participation of teachers and parent boards to guarantee access from kindergarten to grade 6 for those children living in the area of influence. Approximately 4,800 new 6-year-old students in kindergarten and almost 10,500 in grades 1-6 are expected to be incorporated.

a. Organization and operation of the Schooling Networks, to include financing of promotion and sensitization workshops for parents and students, printing of

” Items a, b, c, d and g, will be financed by the Basic Education with Equity loan (ES-0159).

126 promotional materials such as posters, fliers, leaflets, etc. These sessions will deal with topics such as the importance ofdaily assistance and appropriate school access; importance of cooperative work among educational institutions; participation of parents in the school, among other subjects. Also, teachers and principals (40 hours annually) will be trained in the Networks and with their own resources in the areas of administrative-financial management and community participation. A specialized firm will be hired to support the Network’s installation and operation.

b. Learning improvement, to include financing of technical assistance and training for approximately 3,200 teachers in the basic subjects (language and mathematics); academic reinforcement strategies and attention to diversity; school texts and educational materials.

c. Flexible educational strategies to promote school retention, to include the purchase of school spaces from implementing institutions of the accelerated education strategy72 that will benefit 28,000 students, and the procurement of learning modules to develop alternative classroom^^^, benefiting approximately 12,500 students.

d. Improve infrastructure conditions in order to increase access and quality of kindergarten and basic education with equity criteria. To that end, 175 classrooms will be built for coverage expansion (25 kindergarten classrooms and 150 basic education classrooms), 38 basic education classrooms will be replaced and 1,576 basic education classrooms in rehabilitation schools will be renovated, toilet facilities will be built and school furniture will be procured.

e. School feeding. In order to promote school assistance and retention snacks will be delivered daily during the school year to all children from kindergarten to sixth grade. Parents will cooperate in the preparation ofthese snacks.

f. Promote the literacy and basic education program for adults. To that end, groups ofyouth or adults who never studied or prematurely dropped out of school and therefore did not complete their education will be identified. Literacy and basic education will be prioritized (levels I,I1 and 111) to the younger groups of 15-24 years in the selected municipalities.

g. Monitoring and evaluation of the network’s operation, to include financing of monitoring workshops and consultancies for the design and implementation of a network information system, systematization of the Network’s development processes and impact assessment ofthe Network.

72 The accelerated education strategy consists in assisting over-age children and youth, thus allowing to accelerate their first and second cycle of basic education studies. 73 The altemative classroom strategy consists in assisting students of two or more grades of first and second cycle of basic education jointly with the aid of one single teacher, using a personalized methodology through the use of adequate materials for each student’s grade and level.

127 V. IMPLEMENTATIONSTRATEGY

5.1 REE is a program that integrates in a single group a limited quantity of schools in a same geographic area, with the purpose of offering children and youth the opportunity to complete basic education, under a same pedagogic orientation and with a coordinated administrative system.

5.2 The REE will allow making adjustments in the administration model of the educational institutions, giving special importance to teaching for schools that have between one and three teachers.

5.3 Each REE will have an educational center headquarters, in charge of several institutions, with which will carry out several activities with the objective of improving education at their corresponding level. This will favor more dynamic communication between schools and their teachers.

5.4 The Networks will allow efficiency improvement of education services provision and achieving access to quality education for children and youth from rural areas of greater poverty and educational delay, as well as marginal urban areas. Priority will be given to kindergarten for 6-year-olds and grades 1-6 ofbasic education.

5.5 School Networks will be effective because they will improve the possibilities of children, youth and adults in the country’s poorest municipalities to complete the sixth grade. They will also be effective because they will incorporate strategies for the curricular development to focus on basic competencies, especially language and mathematics, not to imply that science and social studies will not be strengthened; academic support and flexible strategies will be provided to help improve over-age, absenteeism, repetition, and leaming success indicators.

5.6 Six-year-old children who are not assisted in kindergarten sections regularly or in the event that the community does not have this service, will be assisted through an intensive course in preparation for reading, writing and mathematical calculation, in order for them to enter the first grade with developed abilities and basic skills.

5.7 Adult literacy and basic education processes will be developed through literacy circles and operation of adult night schools, in order to increase literacy levels and accomplish the commitments assumed by the country in the World Conference on Education for All: “To increase adult literacy levels by 50 percent by the year 2015, particularly for women, and to facilitate equitable access to basic and continuing education for all adults”.

5.8 The REE will be managed by a council formed by the presidents ofthe governing boards of each educational institution, and will have a resource management role in order for students to finalize their basic education.

5.9 Each Network will have a coordinator responsible for actively participating in the preparation ofthe Educational Network Project; preparing and arranging support projects in the academic area to benefit students; supporting the principals in pedagogic

128 monitoring of teachers in the classrooms; and providing technical assistance in different subjects as needed.

5.10 The Network coordinator will be the link between the teachers and the Asociaciones Comunales Educativas (ACE) and the associated Consejos Directivos Escolares (CDE), and the liaison with the Departmental Bureau.

5.1 1 The whole process will be supported by the monitoring teams of each Departmental Bureau, who will keep abreast ofthe agreements made in the Network; also, will provide the necessary technical assistance, supervision and control.

5.12 The Networks, as management strategy, will emphasize cooperative work among the different educational centers and will strengthen teachers’ professional development. Furthermore, they will be formed by the entire educational community, and at the same time these will be networks ofparents, teachers and students.

5.13 To achieve effective school management, the implementation of an Educational Network Project (PER) that articulates the strategies previously mentioned to strengthen administrative, pedagogical and evaluation processes will be needed.

5.14 Once the PER has been prepared, teachers will have to make decisions regarding projects to be implemented based on results of the indicators analyzed in them. They will then have to prepare an annual network education plan to include improvement actions, regarding management, pedagogical, and evaluation processes.

129 Annex 18: Basic Infrastructure and Equipment

3. Basic infrastructure and equipment74 (US$67 million) This component is complementary to the TMC and health and nutrition components, and its objective is to reduce social exclusion and poverty factors associated with the lack of water and sanitation in the communities, to problems pertaining basic infrastructure, equipment and access works that reduce or cancel the impact of health, nutrition and education services. Financing is expected for works that increase coverage of services at levels compatible with the Millennium Development Goals through three subcomponents:

Drinking water and basic rural sanitation (US$42 million). The objective of the interventions in the drinking water and basic rural sanitation subcomponent is to decrease waterbome diseases, which is expected to be achieved through improving and increasing access to drinking water and basic sanitation services in the municipalities targeted by the Network. With the introduction of drinking water for human consumption, the incidence of waterbome diseases in comparison to the baseline is expected to decrease by 26 percent, which will especially affect children under 5 years of age. Likewise, 10,000 latrines will be built or improved. The investments to be financed by the Program to ensure provision of drinking water and basic sanitation services integrally with a focus on demand have been grouped in three categories:

a) Institutional strengthening and technical assistance. The strategy consists of improving communities’ capacities in terms of management, operation and maintenance of systems and leave installed capacities in municipalities to provide technical assistance to communities for the operation and maintenance of systems built or renovated. The main activities to be financed are: (i)meetings and seminars to promote the subcomponent in all targeted municipalities; (ii)workshops and seminars in the communities to encourage community participation; (iii)community education programs that recognize intercultural and gender issues in terms of rational use and conservation of water, prevention of waterborne diseases, conservation of sanitary infrastructure, and pricing; (iv) training of leaders and members of the community in management, operation and maintenance of services; (v) technical assistance to the communities in the selection of services management method to be adopted; (vi) training for municipalities to adapt technical assistance to the rural sector; and (vii) training workshops for municipalities in management monitoring and evaluation. b) Studies. Financing ofconsultancies contracting to prepare projects, including preparation of baseline to measure results achieved in each benefited locality and necessary studies and designs for the systems’ renovation or expansion. Among the main studies to formulate each project, the following stand out: (i)estimating water demand; (ii) project’s engineering designs; (iii)determining water-bearing capacity; (iv) defining pricing structure and level; and (v) cost-benefit analysis. c) Investments and equipment. Financing of investments and equipment to carry out engineering works, as well as purchase and installation of necessary equipment for

74 The FISDL will be responsible for implementing this component.

130 drinking water and sanitation infrastructure. Likewise, financing of technical assistance to set systems in motion during the first six months. If it is economically and financially feasible, the collection of sewage will be done by sewage systems or by individual solutions, with a condition for eligibility that all projects have adequate disposal for generated sewage. Sewage treatment will be done according to dilution and recovery capacity ofthe receiving body. Finally, financing of necessary equipment to support the management oftargeted communities and municipalities.

Strategic infrastructure (US$18 million). The objective of this subcomponent is to eliminate barriers that hinder access to education and health services. To that end, it will include financing of solutions to electricity problems in health centers and schools within the scope of the Program, as well as small infrastructure works such as road intersection and pedestrian bridges and rural access roads (including drainage and risk mitigation works) to eliminate isolation and to open access to services and markets. It is estimated that 140,000 people in rural areas will benefit.

Renovation and equipping of health units (US$7 million). The objective of this subcomponent is to ensure health care continuity by strengthening the capacity for resolution of primary level health units in the 32 municipalities under extreme severe poverty to respond to the increasing demand that will be generated by the Program. By extending coverage of promotion and prevention interventions in the Program’s beneficiary communities, the health units in the municipal administrative center will receive frequent references of patients that do not usually turn to the MSPAS services network, whether for professional care for labor, malnutrition cases, rehydration for children with severe cases of EDA, or respiratory therapy. This lack of care is reflected in high morbidity and mortality rates in those areas targeted by the Program. Since 29 out of 33 health units in those municipalities mentioned do not comply with the ministry’s infrastructure and equipping regulations, financing will be provided for infrastructure renovation and equipping linked to primary level matemal-child care, including childhood-prevalent diseases.

Infrastructure projects that will be financed include, among others, structural repairs (ceilings, walls), drainage systems, water provision, waste disposal, electrical networks, renovation of sterilization areas, delivery room, adaptation ofrooms for patient care (lighting and ventilation), and construction of perimeter walls to protect the establishments. The MSPAS carried out the initial needs relief and estimates that the renovation projects will amount to less than US$lOO,OOO per serviced unit. In terms of equipping, the package includes equipment, instruments and furnishings for institutional care of delivery without risk (risky deliveries are referred to the secondary level), care for the most prevalent transmissible diseases (e.g., respiratory therapy and rehydration) and care for acute malnutrition cases, It is expected that units will also be equipped with ambulances to transport patients from the communities. The MSPAS estimated operating (human resources and supplies) and maintenance costs of these investments, which were included in the 2005 budget proposal presented to the Ministry ofTreasury.

131 Drinking water and basic sanitation. Implementation will be carried out in compliance with operational, technical, economic and financial requirements, and rules and procedures established by the MO. The studies planned will be carried out in each eligible community, in accordance with the methodology defined by the FISDL and agreed with the Bank. Only integral interventions with demand focus will be financed, in other words, those with a corresponding component ofadequate wastewater evacuation. Funds will be assigned directly in the 32 municipalities under severe extreme poverty, and by tender in the remainder 68 municipalities. Eligibility criteria in beneficiary communities are: (i)that these be located in the rural area of those municipalities targeted by the Program; (ii)that they commit to contribute in money or in kind at least 25 percent of the work’s cost; and (iii)that they take on the costs of management, operation, maintenance and depreciation of short-term assets (5 years), by payment oftariffs defined by the community itself prior to the start ofimplementation ofworks. Financed technologies will have to be validated and approved by beneficiary communities in assemblies where their operation will be explained. Projects will be financed only if they are feasible in economic terms (based on cost-benefit criteria, measured based on payment availability analysis), financial terms (based on the systems’ positive cash flows, once these are built), and in technical terms.75 Also, they will have to be environmentally sustainable, in other words, the works may not generate negative environmental effects.

Strategic infrastructure. The FISDL will contract services directly or through the municipality, NGO or community, according to the presented project’s characteristics, as established by the MO. The FISDL will manage funds and contracts during the full project cycle and will inspect processes and works. Eligible beneficiaries are those where barriers to access to services have been identified and that constitute eligible infrastructure works. The amounts ofthe works will have a budget ceiling according to their type, as established in the MO.

Renovation and equipping of health units. For infrastructure renovation of29 health units the MSPAS, with support from FISDL, identified those specific projects in compliance with their technical and environmental regulations, which will be put out to tender by FISDL for private contractors. The initial needs relief indicates that the maximum amount for infrastructure per unit will be US$lOO,OOO. For equipping, the MSPAS identified needs in the 32 poorest municipalities and will turn in to FISDL the list of supplies and technical specifications to carry out the centralized tender of the required equipment. The subcomponent’s implementation mechanisms, as well as the list ofworks and equipment per type, including the outline of ambulance assignment by geographic region are in the MO. Before transferring resources to each municipality as part of the basic infrastructure and equipping component, an agreement will have to be signed between FISDL and the municipality, establishing the terms of transfer and liabilities of the parties in terms of acquisition, resource management and maintenance.

’’ Criteria: (i)during the design period (20 years), at least one source must be capable ofproviding the amount of liquid necessary, and feasibility to treat water through purification systems low in cost and easy to maintain and operate; (ii)no conflicts ofuse in terms ofthe source to be utilized; (iii)proximity between the population and the source, such that the conductivity line turns out economically feasible and special works requirements are minimal; (iv) population density such that the distribution network’s piping length and energy loss do not considerably increase cost ofworks; and (v) the community is not settled in areas listed as potential risk zones.

132 Annex 19: IBRD Map 33401

133 SEPTEMBER 2004 SEPTEMBER

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