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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 3 1740-NI PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 7.2 MILLION (US$ 11 MILLION EQUIVALENT) TO THE REPUBLIC OF NICARAGUA FOR A HEALTH SERVICES EXTENSION AND MODERNIZATION PROJECT IN SUPPORT OF THE SECOND PHASE OF THE HEALTH SERVICES EXTENSION AND MODERNIZATION PROGRAM Public Disclosure Authorized March 4,2005 Human Development Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Public Disclosure Authorized Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 28,2005) Currency Unit = C6rdoba 16.18 C6rdobas = US$1 US$1.52 = SDR 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APL Adjustable Programmatic Loan BSG Budget Support Group CAS Country Assistance Strategy cc Code of Conduct CD Compact Disk CFP Country Financing Parameters CHFS Community Health Financing Scheme CM Casa Materna (Matemity Waiting Home) CP Capitation Payment CUT Cuenta Unica del Tesoro (Single Treasury Account) DGPD Direcci6n General de Planeaci6n v Desarrollo DHS Demonraohic and Health Survev EA Environmental Assessment EHP Elderly Health Program (of INSS) EMP Empresas MCdicas Provisionales (Previsional Medical Firms) ENDESA Encuesta Nicaraguense de Demografia y Salud (Nicaraguan Demographic and Health Survey) FM Financial Management FONMAT Fondo para la Maternidad e Infancia Seguras (Safe Malernity and Infancy Fund) FOR OFFICIAL USE ONLY FONSALUD Nicaraguan Health Sector Support Fund FYIP Five Year Implementation Plan GDP Gross Domestic Product GON Government of Nicaragua HCW Health Care Waste HCWM Health Care Waste Management HCWMP Health Care Waste Management Plan HIPC Heavily Indebted Poor Countries ICB International Competitive Bidding IDA International Development Association IDB Inter-American Development Bank IEC Information, Education and Communication INEC Instituto Nacional de Estadisticas y Censos INSS Instituto Nicaraguense de Seguro Social (Nicaraguan Social Security Institute) IPDP Indigenous Peoples’ Development Plan IPP Indigenous Peoples’ Plan IRR Internal Rate of Return LAC Latin America and the Caribbean MAIS Modelo de Atenci6n Integral de Salud (Integrated Health Care Model) MCH Maternal-Child Health MDG Millennium Development Goals MINSA Ministerio de Salud (Ministry of Health, MOM MTEF Mid-Term Economic Framework MOF Ministry of Finance and Public Credit , MOH Ministry of Health MOU Memorandum of Understanding MS Mesa Sectorial de Salud (Health Sector Council) NCB National Competitive Bidding NDF Nordic Development Fund NGO Non-Governmental Organization NHP National Health Plan NORAD Norwegian Development Agency NPV Net Present Value PACC Plan Anual de Compras (Annual Procurement Plan) PBHS Paquete Bisico de Servicios de Salud (Basic Package of Health Services) 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 /withoutWorld Bank authorization. PHC Primary Health Care PMSS Proyecto de Modernizacih del Sector Salud (Health Sector Modernization Project, World Bank) PREM Poverty Reduction and Economic Management PROCOSAN Programa Comunitaria de Salud y Nutrici6n PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Support Program SIGFA Sistema de Gerencia Fiscal Administrativo (Adminiftrative Fiscal Management System) SILAIS Sistema Local de Atencih Integral de Salud (Local Integrated Health Care System) SIMINSA Sistema Informhtica del Ministerio de Salud (MOH Information System) SIPLA Sistema de Planificacih (Planning System) SWAP Sector Wide Approach TOR Terms of Reference USAID United States Agency for International Development Vice President: Pamela Cox Country ManagerDirector: Jane Arrnitage Sector Leader: Laura Rawlings Sector Manager: Cristian Baeza, Acting Task Team Leader: Jesus Maria Fernandez Diaz NICARAGUA Health Services Extension and Modernization (2nd APL) CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE................................................................................................... 7 1. Country and sector issues .................................................................................................... 7 2 . Rationale for Bank involvement ........................................................................................ 10 3 . Higher level objectives to which the project contributes ................................................... 11 B . PROJECT DESCRIPTION................................................................................................................................ 11 1. Lending ipstrument ........................................................................... ................................ 11 2 . Project development objective and key indicators ............................................................ 14 3 . Project components ............................................................................................................ 15 4 . Lessons learned and reflected in the project design .......................................................... 19 5 . Alternatives considered and reasons for rejection ............................................................. 20 C. IMPLEMENTATION........................................................................................................................................ 21 1. Partnership arrangements ................................................................................................... 21 2 . Institutional and implementation arrangements ................................................................. 21 3 . Monitoring and evaluation of outcomes/results ................................................................ 22 4 . Sustainability ..................................................................................................................... 23 5 . Critical risks and possible controversial aspects ............................................................... 24 6 . Loadcredit conditions and covenants ............................................................................... 25 D. APPRAISAL SUMMARY ................................................................................................................................ 25 1. Economic and financial analyses ....................................................................................... 25 2 . Technical............................................................................................................................ 26 3 . Fiduciary ............................................................................................................................ 27 4 . Social ................................................................................................................................. 28 5 . Environment ...................................................................................................................... 28 .. 6 . Safeguard policies.............................................................................................................. 30 7 . Policy Exceptions and Readiness ...................................................................................... 30 Annex 1 : Country and Sector or Program Background ............................................................................................... 3 1 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ......................................................... 41 Annex 3: Results Framework and Monitoring .............................................. Annex 4: Detailed Project Description........... .......... ............... Annex 5: Project Costs ................................................................................................................................................ 63 Annex 6: ImplementationArrangements .................................................................................................................... 64 Annex 7: Financial Management and Disbursement Arrangements ........................................................................... 69 Annex 8: Procurement Arrangements ......................................................................................................................... 76 Annex 9: Economic and Financial Analysis................................................................................................................ 81 Annex 10: Safeguard Policy Issues ............................................................................................................................. 91 Annex 11: Project Preparation and Supervision ........................................................................................................ 103 Annex 12: Documents in the Project File.................................................................................................................. 104 Annex 13: Statement of Loans and Credits ............................................................................................................... 105 Annex 14: Country at a Glance ................................................................................................................................. 106 Annex 15: Map IBRD 33456 ...................................................................................................................................