Documentof The World Bank FOR OFFICIAL USEONLY ReportNo: 27247 - CL PROJECT APPRAISAL DOCUMENT ONA PROPOSEDSOCIAL PROTECTION TECHNICAL ASSISTANCE LOAN INTHE AMOUNT OF US$10.71MILLION TO THE REPUBLIC OF CHILE November21,2003 HumanDevelopmentManagement Unit Argentina, Chile, Paraguay and Uruguay Country Management Unit LatinAmerica andthe Caribbean Region -1 __.- - This documenthas a restricteddistribution and may be used by recipients only inthe performanceof their may nut be otherwise disclosed without World Hank authorization. I_--- CURRENCY EQUIVALENTS (ExchangeRateEffective November 19,2003) USD$1 = CLP$618.25 (+/-)Variable FISCAL YEAR January 1- December31 ABBREVIATIONS AND ACRONYMS BPF Conditional cash transfer for participants in Puente Program (Bono de Proteccidn Familiar) CAS Country Assistance Strategy Chile's national household survey, conducted every two years (Caracterizacidn Socio Econdmica CASEN Nacional) CONADI National Comission for Indigenous Development (Corporacidn Nacional de Desarrollo Indigena) CONAMA National Environment Commision FichaCAS Questionnaire basedtargeting instrument used to prioritize recipients of social transfers FMA Financial Management Assessment FMRs Financial Management Reports FONASA Chile's public health insurance system (Fondo Nacional de la Salud) FOSIS Chile's social investment fund (Fondo Solidario de Inversidn Social) GDP Gross Domestic Product GPN General Procurement Notice ICB International Competitive Bidding IDB Inter-American Development Bank IPDP Indigenous Peoples Development Plan LCS Least Cost Selection MIDEPLAN Ministry of Planning and Cooperation NCB National Competitive Bidding NGOs Non-Governmental Organizations OECD Organization for Economic Cooperation and Development OM Operations Manual PASIS Non contributory, social assistance benefit to elderly indigent (Pensionesasistenciales) PIU Project Implementation Unit PUENTE Entry program to Chile Solidario, administered by FOSIS QCBS Quality and Cost-Based Selection SA Special Account SAP Potable water subsidy (Subsidioa1 Consumode Agua Potable) SBD Standard Bidding Documents SOEs Statement of Expenditures SUF Non contributory single subsidy to poor families (Subsidio Unico Familiar) VAT(rate) Value Added Tax Vice President: David de Ferranti Country DirectorLCC7C: Axel van Trotsenburg HumanDevelopmentDirector: Ana Maria Arriagada HumanDevelopmentLeadEconomist: Ariel Fiszbein Sector Leader, HumanDevelopment LCC7C: Jesko S. Hentschel SocialProtectionSectorManager: ChristopherChamberlin Task Team Leaders TheresaJones & TrumanPackard FOR OFFICIAL,USEONLY Chile: Social Protection Technical Assistance Loan CONTENTS Part A Strategic Context and Rationale 3 Country and sector issues 3 Rationale for Bank involvement 4 Higher level objectives to which the project contributes 5 Part B Project Description 5 Lending instrument 5 Project developmentobjective andkey indicators 6 Project Components 6 Lessons learnedandreflected inthe project design 10 Alternatives consideredandreasons for rejection 10 Part C Implementation 11 Institutionaland implementation arrangements 11 Monitoring and evaluation o f outcomes/results 13 Sustainability 13 Critical risks and possiblecontroversial aspects 14 Part D Appraisal Summary 14 Economic and financial analysis 14 Technical 15 Fiduciary 15 Social 16 Environment 17 Other Safeguardpolicies 17 Policy Exceptions and Readiness 18 Annexes Annex 1 Country and Sector Background 19 Annex 2 Major RelatedProjects Financedby the Bank and other Agencies 24 Annex 3 Results Framework and Monitoring 25 Annex 4 Detailed Project Description 30 Annex 5 EstimatedProject Costs 36 Annex 6 ImplementationArrangements 37 Annex 7 Financial Managementand DisbursementArrangements 39 Annex 8 ProcurementArrangements 42 Annex 9 Economic and Financial Analysis 49 Annex 10 SafeguardPolicy Issues 50 Annex 11 Project Preparationand Supervision 55 Annex 12 Documentsinthe Project File 56 Annex 13 Chile: Financial Relationswith the World Bank 57 Annex 14 Map: IBRD 25555 This document has a restricted distribution andmay be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization. Chile SocialProtectionTechnicalAssistance Loan ProjectAppraisal Document Latin America andthe CaribbeanRegion HumanDevelopment Date: November 21,2003 TeamLeader: Theresa P. Jonesmruman Country Director: Axel van Trotsenburg Packard Sector Managermirector: Ana-Maria Sectors: Social Protection Arriagada Themes: Social Protection Project ID: PO82037 Environmental screening category: C Lending instrument: Technical Assistance Loan -Safeguard screening category: S3 Project Financing Data: [x] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loandcreditdothers: Total Bank financing (US$m.): 10.71 Proposed terms: Fixed spread loan inUS$ with 4 semiannual repayments on June 15 and December 15 2010-2011 Financing Plan (US$m.) Source Local Foreign Total Borrower 4.29 4.29 "/IDA 9.91 .8 10.71 Others Total 14.2 .8 15.0 Does the project require any exceptions from Bank policies? oYes @No Have these been approved by Bank management? I s approval for any policy exception sought from the Board? @Yes oNo oYes @No Does the project include any critical risksrated "substantial" or "high"? Yes N~ Does the project meet the Regional criteria for readiness for @Yes oNo implementation? Project development objective The development objectives of the proposed Social ProtectionTechnical Assistance Loan are to support the efforts of the Government o f Chile to implement ChileSolidurio and lay the foundation of a national system of social protection. Project description [one-sentencesummary of each component] The proposed technical assistance project has the following four components: Design and implementation of a national information system for social protection; 0 Training for the social workers and agencies involved in the implementation of Chile Solidario; Implementation of a system for analysis, evaluation, and monitoring of social programs and policies; and 0 Institutional strengthening to improve the effectiveness of MIDEPLANas coordinating agency for the social protection system inChile. Which safeguard policiesare triggered, ifany The indigenous peoples safeguard policy i s triggered by this project (Operational Directive 4.20). The technical assistanceloan includes several activities designed to ensure that Chile Solidurio reaches and i s effective among these groups, including special studies, training social workers on how to work with indigenous peoples, and the development of indicators to measure the coverage andeffectiveness of the Program among the indigenous population. These activities are described inthe Indigenous Peoples Development Plan (IPDP), a summary o f which i s inAnnex 10. MIDEPLAN prepared the IPDPandit was approved by the Boardof Directors of CONADI. The consultations described earlier included areas o f the country where indigenous groups account for a significant share of the population. Duringproject preparations, additional discussions were carried out with the technical staff o f MIDEPLANresponsible for indigenous issues, Chile Solidurio staff working with indigenous groups, andmembers of the CONADI Board. The IPDPwas made available at the Info Shop on October 23,2003 (Image Bank, IPP-62), and inChile on the MIDEPLANwebsite (www.mideplan.cl.) on October 10,2003. Significant, non-standard conditions, if any, for: Board presentation: None Loadcredit effectiveness: None Covenants applicable to project implementation: None 2 Chile Social ProtectionTechnical Assistance Loan Project Appraisal Document A. Strategic Context and Rationale Country and sector issues 1. While Chile's economic performance was less affected by negative regional developments than many of its neighbors, growth slowed in2002 to 1percent, down from 3 percent in 2001. This deceleration was driven by stagnating investment and a fall inconsumption. Nevertheless, the economy began to revive towards the end of 2002, andby June 2003 growth stood at 3 percent as compared to a year earlier. This growth is expected to be sustained by an expansion of exports as a result of somewhat greater dynamisminthe internationaleconomy, improved copper prices, the entry into force of the free trade agreement with the European Union, and by some strengthening in domestic demand. 2. Chile continues to rely on counter-cyclical fiscal policy, which permits deficits in years of slower growth that are recouped when the economy regains strength. Under this policy, the government keeps its expenditures to a level that would give a fiscal surplus of 1% of GDPif output were expanding at its full potential. Chile has strong economic fundamentals: a credible monetary policy; rules-based fiscal policy; and a flexible exchange system, providing a strong foundation to support rates of growth above 4 percent inthe medium-term. 3. The share of the Chilean population below the poverty line has fallen from 40 percent in 1987to slightly under 16percent by 2000 (the latest year for which national data are available). The share inextreme poverty has droppedfrom nearly 13 percent in 1987 to about 4 percent in 1996, where it has remained. The rapid decline inpoverty was mainly associated with economic growth and an increase intargeted social spending. Nevertheless, the Government i s concerned about the persistent rate o f extreme poverty. 4. Analytical work suggests that an important determinant of persistent extreme poverty i s exclusion from a variety of networks that provide access to public andprivate risk mitigation instruments. Indeed, the gaps in coverage o f social protection programstend to be most common among the poorest and inrural areas. Although Chile's social protection institutions are relatively strong and well run, several weaknesses inthe system may make it harder for the Government to address exclusion. These include: (i) the inefficient use of available information; (ii)weakness of the targeting instrument; (iii) gaps inmonitoring and evaluation of social programs and policies; and (iv) insufficient coordination between different levels of government and civil society. 5. InMay 2002, the Lagos Administration announced the Chile Solidario initiative, a package of legislative and administrative reforms to Chile's poverty reduction and social 3 protection policies'. The objective i s to bringChile's 225 thousand poorest households out o f indigence poverty. The policy reforms, will, inter alia: 0 Institute an outreach strategy to the indigent, connecting many who were previously excluded from the social protection system - including the indigenous; 0 Widen the focus from the individual to the family unit; 0 Shift from a piecemeal approach by better integrating existing social services and cash transfers, andcreate a new temporary conditional cash transfer for the poorest families that choose to participate; 0 Eliminate quotas and rationing of benefits for the poorest; 0 Connect excluded groups to the public and private network o f services; 0 Reduce the number of intermediaries between the providers andbeneficiaries o f social protection interventions; and Act as a catalyst for new targeted interventions inother social sectors. 6. In addition to identifying the households that would be contacted by the case workers, the Ministry of Planning and Cooperation (MIDEPLAN) is coordinating efforts with other line ministries involved in delivering the payments and services guaranteed to targeted households. The integration of different databases used by various public agencies, as well as those administered by the civil registry and taxation agencies, will become increasingly critical to ensure that the initiative i s properly targeted and coordinated. Effective implementation of the reforms linked to Chile Solidario will require a strong monitoring and evaluation system, including the participation of civil society. Rationale for Bank involvement 7. The Bank has worked with Chile over a longperiod of time on analyzing trends in poverty and the effectiveness of the Government's poverty reduction strategy. This work i s embodied in several poverty assessments, as well as other studies, including most recently an analysis of the social protection system (Chile: Household Risk Management and Social Protection). The latter has informed the reforms that are being supported in the proposed technical assistance loan as well as an accompanying adjustment operation. InrecentyearsBanklendingtoChilehasshiftedtowards the socialsectors, including projects inboth health and education. Thus this operation fits well within the Bank's general program in Chile. 8. The Government has requested the technical assistance loan from the Bank inorder to ensure adequate financing and advice during the implementation of the policy reforms that are supported under the adjustment operation. Fromthe Bank side, participationin both operations would facilitate close monitoring of the reform program and provide support in critical areas, such as impact evaluation. The Bank has a comparative 'For a detailed description of Chile Solidario, see Annex 1and the Program Document for the Social Protection Adjustment Loan, October 24, 2003, Report No. 26688. 4 advantage in several of the areas addressedunder the project including impact evaluation, poverty analysis, andbetter integration of information on individuals. 9. The program of the Inter-American Development Bank i s more diverse than that of the Bank, but there are important complementarities as well. For example, inthe case of support for indigenous peoples, the agreed division of labor is that the Bank would integrate ethnicity - as well as gender- into programs rather than deal with them on a stand-alone basis. The IDBi s providing direct assistanceunder its Indigenous Communities Project. Higher level objectives to which the project contributes 10. The most recent CAS for Chile (January 23,2002) sets out 3 broadgoals: (i) sustaining economic growth and social progress; (ii) promoting inclusion, especially o f rural populations and vulnerable groups; and (iii) modernizing the state, necessary for achieving the previous two objectives. Together with the complementary Social Protection Sector Adjustment Loan, the proposedtechnical assistanceloan responds to the latter two objectives. It would support Chile's proposed reform of social policy, directed to the poorest households (disproportionately located in rural areas and encompassing vulnerable groups, such as the indigenous), andincorporates initiatives to modernize the state inorder to facilitate this reform, by supporting better management o f information and an expanded role for civil society. 11. The project would support the Government's objective of reducingindigence poverty andthrough that would contribute to two performance indicators included inthe most recent CAS. As part of the program development goal of promoting inclusion, the project would contribute to the objectives o f (i) reducing the poverty gap between regions and groups; and (ii) increasing the coverage of the poor o f social programs, specifically the family allowance, other subsidies and child-care. Investment or technical assistance lending services inthe area of social protection was envisaged inthe most recent CAS. B. Project Description Lending instrument 12. The proposed operation is a technical assistance loan. This is the most appropriate instrument to assist the Government inimplementing, monitoring, and evaluating the reforms associated with Chile Solidurio. The loan i s closely linked to the social protection sector adjustment loan. The rationale for the borrower's selection of the financial terms (a fixed spread loan inUS$ and a grace period of 6 years with 4 semiannual repayments on June 15 andDecember 15 in 2010 and201l),that they i s allow for increased flexibility and greater efficiency in Chile's debt management. 5 Project development objective and key indicators 13. The objectives of the proposedSocial Protection Technical Assistance Loan are to support the efforts of the Government of Chile to implementChile Solidurio and lay the foundation of anational system of social protection. The loan would support Government actions infour key areas: 0 Reforms to Chile's poverty reduction and social protection policies, to reduce poverty and exclusion by creating greater access to social protection and wider social servicesfor the neediest households (Chile Solidario); 0 Increasing the efficiency and efficacy of social policy through improved targeting andbetter use of information by integrating, gathering and exchanging publicly and privately helddata on households andrelevant to social policy, into a national information system, as well as improvements to the country's primary targeting instrument, the Fichu CAS; 0 Strengtheningregular monitoring and impact evaluation of social programs andpolicies; and 0 Increasingthe sustainability of reforms to poverty reduction and social protection policies, through clear assignment of roles and division of responsibilities betweencentral government, municipalauthorities andcivil society. 14. The primary target group for Chile Solidurio i s the estimated 225 thousandindigent households, a substantialshare of whom would participate. Beneficiaries are expectedto improve their standardof living, including, but not limitedto level of income. Thus if the project is successful, one would expect to see a decline inthe share of householdsbelow the extreme poverty line, higher coverage of existing social protection policies and programs among the extreme poor, and some re-designof interventions to better address the needs of this group. Other groupsbesidesthe extremely poor or those participating in Chile Solidurio will benefit from improvements insocial protection policies because some reforms will affect abroader segment of the population. Becauseof its focus on families inextreme poverty, Chile Solidurio i s expected to have a positive impact on indigenoushouseholds, since they constitute adisproportionate share of these households. Moreover, the Government has developeda strategy to ensure that the program is able to work effectively with indigenous families (Annex 10). This strategy has beenunanimously endorsedby the National Commission for Indigenous Development (CONADI). During the implementation of the project there would be periodic consultationsheldwith CONADI, no fewer than once a year, to updatethemon the activities included inthe strategy. Project Components 15. The proposedsocial protection technical assistance loanhas the following four components: 6 0 Designand implementation o fa national information system for social protection; 0 Training for the social workers and agencies involved inthe implementation o f Chile Solidario; 0 Implementation o f a system for analysis, evaluation, andmonitoring o f social programs and policies; and 0 Institutional strengthening to improve the effectiveness o f MIDEPLANas coordinating agency for the social protection system inChile. Component 1: National Information System for Social Protection (US$3.0 million, excluding contingencies) 16. The design and implementation o f a national information systemfor social protection wouldaddress current limitations o fthe lack of communication, articulation and dialogue between different systems o f information, managed by different agencies. Instead, there would be a holistic design for the gathering, handling, and management o f data related to the social and economic characteristics ofindividuals. Inthe first phase, the system would cover all families participating inChile Solidario. It would then expand to include families participating inall social programs, and finally, cover the total population. Chile would take advantage o f modern technologies inthe area o f hardware, software and communications to promote the interchange o f information on the civil, social, and socioeconomic attributes o f the current population and potential beneficiaries o f social programs inChile. 17. The national information systemfor social protection would be administered by a unitlocated inthe Departmentof Social Information, one of 3 departments ofthe Social Division o f MIDEPLAN. The project would finance consulting services necessary for the design o fthe system and the development o fthe procedures, standards, and rules governing its operation; software applications; computing equipment and data storage/processing services, staff training and the carrying out o f a public information campaign on the benefits o f the integrated system and protection o f individual privacy. Component 2: Training (US$1.7 million, excluding contingencies) 18. There are two training sub-components. The first covers training o f MIDEPLAN and other government officials, at both the central and local levels. To carry out this activity a unit would be set up within the Department o f Social Policy Development within the Social Divisiono fMIDEPLAN. The training supported would include activities to help MIDEPLANprogress inthe design o f a system o f social protection, basedon the initial experience with Chile Solidario, would support the implementationo f the national information system for social protection, and would train staff inthe supervision and evaluation o f a system o f social protection. Inaddition, activities would be organized to train technical teams insocial sector ministries. 7 19. The second sub-component would strengthen the capacity of the social workers and others who work with the families of Chile Solidurio. Training for the social workers i s critical given the importance of the interaction between the social worker and the family inthe design of Chile Solidurio, as well as the complexity of the issuesthey face. Based on the initial experience implementing the Program as well as on consultations with both social workers and supervisory staff, a "community of learning" has been designed. 20. The strategy has several distinguishingfeatures. It stresses team work and facilitating fluid communication between the different actors implementing the Program. It addresses the needs for initial training, permanent skills upgrading, establishment of feed-back loops into improvements in the methodology and organization of these activities, as well as strengthening the Program. This requires a combination o f different mechanisms for training and the formalization of knowledge and experience. The system integrates several types of learning activities including: (i)structured small group discussions among practitioners on specific themes; (ii) a program of short-term exchanges between different municipalities or regions and contacts with technical experts; and (iii) formal training through courses, seminars, and conferences. All of these activities, as well as a virtual library, would be supported through the design and implementation of an appropriate technological platform, that would operate through a special website. 21. An agreement(s) acceptable to the Bank between FOSIS (or another agency satisfactory to the Bank) and MIDEPLAN, to coordinate this training, outlining the respective responsibilities of each agency, including the needto ensure that Bank guidelines are followed, would be a condition o f disbursement for this component of the project. 22. Under training, the project would finance: the design of curricula, the organization of courses, associated travel and materials costs, staff exchanges, national and international technical advice, seminars to discuss issues and problems arisinginthe course of implementation of Chile Solidurio, and supporting technological platforms. Component 3: System for Analysis, Evaluation, and Monitoringof Social Programs and Policies (US$2.2 million, excluding contingencies) 23. The goal of this component i s to strengthen capacity within the public sector to measure the impact of Chile Solidurio and its associated programs. Also included are monitoring activities, that would permit the adjustment of actions as implementation proceeds. The project would finance, (a) the design of an integrated systemto monitor the management, processes and partial results o f Chile Solidurio; (b) the evaluation of the impact of selected programs of Chile Solidurio in addressing the needs of the beneficiaries of Chile Solidurio; and (c) the carrying out of an impact evaluation o f Chile Soliurio inits entirety. Beginning in2003, both the household survey (CASEN) andthe proxy means test (fiichuCAS) will include questions to identify indigenous families. This data would be used to evaluate the impact o f Chile Solidurio on these families and also to test for gaps incoverage of thefichu CAS. On the basis of this information, which 8 should be available inmid-2004, the needfor a special strategy to ensure the registration o f indigenous families would be evaluated, and designed, as necessary. Inaddition, the regional cut-off scores determining the eligibility o f families for Chile Solidario would be reviewed. The monitoring indicators for Chile Solidario include several relatedto indigenous families (for example, the number o f participating indigenous families, the number invited to participate, but refusingthe offer, and the number o f families receiving monetary subsidies). 24. The design and implementation o f a pilot project o f citizen accountability would be supported under the proposedproject. The pilot would involve contracting a consultancy which would designand implement a process o f consultations with community organizations in selected areas to assess the implementation o f Chile Solidario. The information from this consultative process would provide evaluation inputs and helpto detect errors and weaknesses. The activity would be done jointly by: (a) a civil society organization with experience inpoverty alleviationprograms and citizenship accountability, and possessing local networks andhighnational coverage; and (b) an academic or research institution, with experience insocial program evaluation. The Government counterparts for the study would be representatives o f the Monitoringand EvaluationUnit o f Chile Solidario,the Department o f Social Policy Development, and the Department o f Social InclusionPolicies, all inMIDEPLAN. Component4: InstitutionalStrengtheningof MIDEPLAN andProject Administration(US$3.2 million, excludingcontingencies) 25. Inorder for MIDEPLANto carry out its designated role to coordinate the implementation o fthe new set o fpolicies, a program o f institutional modernization and strengthening for the ministry i s required. This process, ifsuccessful, would strengthen MIDEPLAN's role as the coordinator o f social protection policy and programs inChile. Two types o f activities are envisaged. The first i s the installation o f several operating unitsinMIDEPLANto support the operation of ChileSolidario. These unitswould be responsible for: (i)managing analytical work which would address issues and questions as they arise during implementation as more families are covered, they spend more time inthe Program, and eventually "graduate"; (ii) organizing training; (iii) supporting the Executive Secretariat for Chile Solidario; (iv) coordinating the integration o f information sources; (v) monitoring the progress o f the program; and (vi) handling the day-to-day administration o f the technical assistance loan. Each unit would contribute to the strengtheningo fMIDEPLAN's analytical andprofessional capacity. 26. Several studiesrelating to issues related to indigenous families are planned. These includea review o ftheir status on basic needs andthe human development index, and their demand for public services andprograms. Inaddition, MIDEPLANplansto include an expert inindigenous issues (selected by CONADI) inall o f the working groups constituted to develop the terms o freference or other proposals for studies related to Chile Solidario. Inaddition to consultancy services, the proposed project would finance office equipment for the Project Implementation Unit,as well as the refurbishment o f office space. 9 27. The second major activity inthis component is the carrying out of an analysis of the current strengthsand weaknesses of the Social Division of MIDEPLAN. Based on that analysis, a proposal would be formulated for the restructuring of the Social Division so as to support more efficiently the coordination and installation of ChileSolidario and, more broadly, of a social protection system more inclusive of the extreme poor. Lessons learned and reflected inthe project design 28. The design and implementation arrangements take into account lessons learned from other activities in Chile, as well as technical assistanceprojects in general. The project addresses one of the two primary roles identified for the Bank in the recently completed Country Assistance Evaluationin Chile, which i s to advance the social agenda, including safety net programs. Other key lessons are: (i) the need for borrower commitment with strong project leadership; (ii) project design that builds on policies where the Bank has previous involvement; and (iii) institutional capacity buildingof key public sector agencies to ensure sustainability. The Chileans worked closely with the Bank to prepare the project andput into place some of the administrative structure (project coordinator, for example) for project implementation. The ChileSolidario initiative was identified within Chile and announced by the President. The request for technical assistance derives from the Government's recognition that improvements were needed in its poverty reduction strategy and social protection institutions andthat the Bank could assist in that effort. The Bank has longexperience working with the Chilean Government to analyze poverty trends and reduction strategies, most recently in sector work on householdrisk management and social protection. The technical assistance project focuses on strengthening MIDEPLANso that it can coordinate social protection policy in Chile. Alternatives considered and reasons for rejection 29. The proposed project i s linked to the Social Protection Sector Adjustment Loan. Alternatives would have been for the Bank and the Government to proceed with either the technical assistance or the adjustment loan. The advantage with implementing them together i s that it increases the potential participation of the Bank in assisting the Government inthe implementation of ChileSolidario. Involvement inthe details o f implementation and evaluation through the technical assistance project will help support the commitments made inthe adjustment loan. Another option would have been to process an investment project in support of the program. Given the desire of the Chilean authorities for financing flexibility and technical advice, the combination of the technical assistance and adjustment loan was deemed more appropriate. 10 C.Implementation Institutionalandimplementationarrangements 30. Chile Solidario. InAugust 2002, a Presidential Advisory Commission was created to advise the President of the Republic on the implementation, coordination and consistency o f the measuresof Ministries and other public services in the framework of the Chile Solidurio System. The Commission is comprised of the Minister of Planning and Cooperation (who i s also the head), the Minister of the General Secretariat of the Presidency, the Minister of Labor and Social Security, the Director of Budget, the Sub- Secretary of RegionalDevelopment andAdministration, and the Executive Director o f the Fundof Solidarity and Social Investment (FOSIS). 31. The Commission has the following responsibilities: Propose the measures necessary for the implementation and adequate functioning of Chile Solidurio; Coordinate the distinct organs of the government administration, with the goal of optimizing the use of public resources - human, financial, and technical - directed to individuals and families in extreme poverty; Serve as the coordinating body for the authorities andagencies involved in the implementation of Chile Solidurio and for the measures, actions, and programs that are carried out within that framework; Propose legal or administrative changes aimedat benefiting individuals and families inextreme poverty; Ensure the fulfillment of the sectoral program initiatives that are intended to benefit the extremely poor population; Make specific proposals on the requirements o f Chile Solidurio,on financial matters, andmanagement of resources andcommunications; Ensure adequateprogress of Chile Solidurio, supervising the goals and the time periods that are defined to execute the program, and the measures and actions that are included; and Informthe President o f the Republic periodically, through the Ministry of Planning and Cooperation, concerning the progress on the Program and fulfillment of its commitments. 32. An Executive Secretariat, located inthe Ministry of Planning and Cooperation, i s responsible for providing technical and operational support to the Commission. The Secretariat reports directly to the Minister o f Planning andCooperation. The Executive Secretariat can carry out activities inthe regions, through the respective Regional Secretary of Planning andCooperation. The Secretariat i s responsible for: 11 Assistingthe President of the Commission; Performing tasks delegated to them by the President of the Commission; Coordinating the services of the public administration; and Proposing to the Commission the mechanisms to evaluate the actions which are carried out inthe framework of Chile Solidario. 33. The Ministry of Planning and Cooperation i s responsible for providing the technical and administrative support necessary for the effective functioning o f the Commission and the Executive Secretariat of Chile Solidario. The communication strategy for Chile Solidario i s handledby the communications unit of MIDEPLAN. 34. In addition to the head, the Executive Secretariat has three members, each with specific responsibilities. The first member i s incharge of the process o f entry of families into Chile Solidario (including the analyticalunderpinnings of the strategy) and the delivery of the Bono de Proteccio'n Familiar to them. The second member i s incharge of the delivery of monetary transfers to the Chile Solidario families that require them and meet the eligibility criteria (family allowance, old age or disability pension, and water and sewerage subsidy). The third member i s incharge of the supply of services (education, health, employment, etc) to the families. 35. Management Arrangements for the Technical Assistance Loan. Management of the proposed technical assistance loan would be located within the Social Divisionof MIDEPLAN. The Project Coordinator would report directly to the Chief of the Social Division. S/He would be responsible for managing the project, as well as for relations with other institutions, which are critical given the integrated nature of the Chile Solidurio Program. The Project Coordinator would head a unit of 4 professionals, each of whom would be responsible for a component. Inaddition, there would be a unit responsible for training and technical assistance incorporatedwithin the Social Division. This unitwould be responsible for organizingthe training activities envisaged to strengthen the sectoral and ministerial capacities at the central and regional levels inthe area of social protection. They would also provide technical assistance to these institutions inorder to transfer technical expertise andappropriate methodologies in the area of social protection, as well as strategic planning. The materials that would be used for this activity would be producedby the Department of Social Policy Development, particularly the strategy group that would be supported by the technical assistance loan. Their activities would focus first within MIDEPLANand then would extend to other ministries and sectors. A training coordination agency would be responsible for the training program for social workers. 36. The Finance Department of MIDEPLANwill be responsible for the accounting, budgeting, andtreasury operations of the project. Project operations will be recorded and processed inthe integratedfinancial management system o f MIDEPLAN. The operations of the Finance Department are fully documented intheir Finance Administration Manual. There i s proper segregation of duties, and posts are staffed by competent personnel. In line with procedures followed with other Bank funded 12 operations in Chile, loan proceeds will be disbursed into a Special Account inDollars in the Central Bank of Chile under the control of the National Treasurer. The disbursement method to be used by the Project will be transactions based on Statements of Expenditure. Monitoring and evaluationof outcomedresults 37. The overall aim of Chile Solidurio i s to eliminate extreme income poverty (indigence) inChile. Under this overall objective there i s a set of intermediate objectives, centered on the specific capabilities at the family level identified on upriori grounds as key to escaping extreme poverty. Pre-determined minima are set for a long list of intermediate outcome indicators, related to access to employment, existing subsidies, social services and participation inthe community. These multiple objectives are nested under the overall aim of eliminating extreme income poverty; the intermediate objectives are not seen as independent objectives. However, to fully assess the program it i s desirable that one can identify impact on the intermediate objectives, so one can learn about the ways inwhich overall impact i s (or i s not) achieved. 38. The evaluation efforts that would be supported under the proposed technical assistanceloan are designed to assurethat there i s a complete and rigorous ex-post impact assessmentcovering the range of both final and intermediate objectives of the Program and other (possibly unexpected) benefits and costs. The evaluation design takes advantage o f the existing CASEN survey which has a long history in Chile and would be carried out inNovember 2003 and again in 2006. The 2003 survey includes additional questions related to Chile Solidurio. The survey would be usedto identify both treatment (beneficiaries of Chile Solidurio)and control group families2. In addition, a supplementary sample of Chile Solidurio would be surveyed inorder to ensure representativeness at the regional level. The samples of Chile Solidario and control group families would be re-surveyed inboth 2004 and 2005, the years inbetween the CASEN survey. 39. A second strand of evaluation would be complementary qualitative research, so as to better understand the processesinfluencing the program's impact (or lack o f impact). This would include instruments such as beneficiary assessmentsand participatory monitoring and evaluation with local groups, including some involved inthe private and public network of services provided to the participants in Chile Solidurio, and research on indigenous participants. Sustainability 40. Chile currently spends a relatively low share of its GDP on social assistance (about half of 1percent of GDP), compared to either OECD or other countries in the Latin America Region. One of the objectives o f the Chile Solidurio System i s to expand * The control group would comprise families whoseficha CAS score exceeds the cut-off in their locality, but not in others; families whoseficha CAS score is close to, but above, the cut-off point, and families who would be invited to participate in subsequent years. 13 coverage of the social protection system to the extremely poor who are not participating. Inordertoensure financialsustainability, the Congressalreadyhas approvedanincrease intax rates, including a 1% increase inthe VAT rate, intended to ensure that adequate resources are available. The activities included inthe technical assistance loan are designed to ensure the sustainability of the improvements inthe social protection system, particularly the installation of the National System of Information for Social Protection, training for social workers andgovernment staff, and strengthening o f the capacity of MIDEPLAN,particularly inthe areaof monitoring and evaluation of social programs. Critical risksand possiblecontroversialaspects 41. The risks to this program are considered minimal. Chile's excellent track recordin economic management, program implementation and transparency make the satisfactory completion of the program highly likely. Nevertheless, several areas could prove difficult for the Government to implement. These include: closing the employment gap among the neediest households; ensuring good targeting of Chile Solidurio and making any needed adjustments duringimplementation; including historically excluded groups, such as the indigenous; and promoting greater participation of local governments and civil society. 42. A draft bill of law for Chile Solidurio has beenpresented to the National Congress. It would provide clear powers for MIDEPLANto coordinate and implement Chile Solidurio, to create the national information system for social protection, and consolidate the administration of the cash transfers. Although the law has not yet passed, the Chile Solidurio Programhas been carried out since 2002 under contractual arrangements with the agencies involved. Delay inpassage o f the law could slow implementation and the formalization of these administrative arrangements, but would not prevent the Government from continuing to make progress on the reform program. D. AppraisalSummary Economic and financialanalysis 43. Given that this is a technical assistance project, a standard economic and financial analysis has not beencarried out. Nevertheless, significant efficiency gains are expected from several activities of the project, over and above its contribution to improvements in both the access of the poorest households to the social protection system and the effectiveness of this system in alleviating extreme poverty. For example, improvements inthe accuracy of the proxy means test are aimedat reducingtargetingerrors. The better integration and use of information on households would enable cases o f fraud, misallocations, and overlapping or duplicating benefit payments to be identified and eliminated. Improvedcoordination between the various targeted poverty alleviation programs are expected to result in efficiency gains. 14 Technical 44. The choices of informationtechnology (both hardware and software) for the information system for social protectionhave taken into account compatibility with other systems in Chile, particularly within the public sector, and those which have been shown to be more robust and suited for this type of work. The project has been guided by expertise both within Chile and from similar systems in other countries. The proposed design for the evaluation of Chile Solidur-io reflects best practice in the area of impact evaluation and makes use of recent statistical techniques andinnovations in the field. Fiduciary 45. The procurement assessment (see Annex 8) showed that MIDEPLANhas experience inthe procurement of goods and consultant services and has solid technical andadministrative capacity. InJuly 2003, Chile enacted law 19886 (Procurement law), which provides the framework for procurement of supply and service contracts. Current legal regulations promote transparent and competitive practices and contain sound provisions for contract administration and evaluation. However, certain provisions are in conflict with Bank policy. These were discussed with MIDEPLANstaff during preparation. Inorder to ensure that Bank guidelines are followed, specific provisions have been incorporatedinto the Loan Agreement (set forth also inAnnex 8,B). The procurement chapter of the operational manual for the project would set out the main responsibilities and procedures that would be followed, consistent with Bank guidelines. Procurement risk i s assessedas average. 46. The Financial Management Assessment (see Annex 7) found that the financial management of MIDEPLANsatisfies the Bank's minimumfinancial management requirements andthat MIDEPLANcan produce the requisite project financial management reports following procedures agreed duringproject preparation. The assessmentrates financial management risk as low since the project will operate under the responsibility of the Department of Finances of MIDEPLANand would be fully integrated with the MIDEPLANfinancial management systems. MIDEPLANwould confirm in the Operational Manual that the project specific coding needed to report using the format of the cost categories andcomponents set out inthe loan agreement has been incorporated into the integrated financial management system. Other financial management provisions will be included inthe operations manual. Chile has an excellent record on compliance with project audit requirements. MIDEPLANhas agreed to contract the Auditor General of Chile to conduct the annual project audit inline with Bank guidelines. 47. The main implications for the project design o f these assessments are: (1) the decision that procurement and financial administration functions would be integrated within MIDEPLAN; (2) agreement on the content of the parts o f the operational manual dealing with these topics; and (3) the need for specific training for project unit and MIDEPLANstaff inBank procedures. 15 Social 48. The Chile Solidario initiative was announced inMay 2002by President Lagos. The involvement of the highest levels of Government has assistedthe Program inbeing able to begin to shift away from the piecemeal approach regarding extreme poverty alleviation to a more consolidated and integrated effort. Nevertheless, it i s to be expected that as the reform proceeds, there may be resistance from other public institutions and different levels o f government to the reforms and administrative changes being promoted by the reform initiative. So far, MIDEPLANand FOSIS are managingthese risks throughboth their communications strategy andtheir ability to establish effective working relationships with many public institutions, even at this early stage of implementation. So far, there are 25 agreements between MIDEPLANandgovernment or private agencies inthe context of the Program. All eligible municipalitieshave concludedagreements with FOSIS to facilitate their participation in Chile Solidario. 49. As part of preparation of this project, as well as the social protection adjustment loan, formal consultations were heldwith civil society and municipal authorities in six municipalities selected inconsultation with MIDEPLANto reflect socio-economic, geographical and political diversity. More than 200 people representing civil society organizations (community-based organizations, private foundations, NGOs, andproducer associations), the private sector andlocal governments participatedinthese consultations. The consultations provided a first hand opportunity to the Bank team, as well as MIDEPLANstaff, to listento the assessmentof the stakeholders on progress andthe difficulties encountered during implementation. 50. The main issues identifiedinthe consultations included: Representatives from civil society and local governments had an uneven, but in general, low level of knowledge o f the program. Those directly involved in execution and management had a positive image of the Program and valued it as a new approach to poverty alleviation. There was concern with the ability of the proxy means test to target the extremely poor, inpart because some families had not been surveyed. Also there was disagreement on the cut-off points used for each region and municipality to set eligibility ceilings. Some participants questioned the relevance and, in some cases, feasibility, of some of the minimumconditions which had been set for each participant family. Some specific instruments used by the social workers with the families seemed ineffective or inappropriate insome settings (some rural or indigenous communities, for example). Many pointedto the need to promote more links between the Program and existing social networks inthe community. Better coordination inthe provision of services to the participant families was needed. Inpart, this reflected a gap inthe flow of information and policy directives from the center to the local level. 16 0 Some municipalities and most civil society organizations argued for a more active and systematic role inthe Program. 0 There was concern about the long-term sustainability of the Program which depended primarily on family members obtaining employment, andthus a more stable source o f income. 51. Several activities to be supported by the technical assistance project would respond directly to these concerns. These include special studies, the reform o f the proxy means test, the generation o f information on the coverage of the proxy means test among extremely poor families (including the indigenous), andthe impact evaluation itself. In addition, the Government has decided that in order for the Programto exploit more the strengths of participation with civil society groups, it would undertake a pilot project on social accountability o f the Program. The objective of the pilot is to test the instrument of social control, with the participation of beneficiaries and civil society organizations (see Paragraph 24). Environment 52. The proposed Social Protection Technical Assistance Loan has no direct impact on the environment. For the purposes of Operational Directive 4.01 the operation has an environmental category of C, which does not require an environmental assessment. More generally, the Bank has assisted Chile inimproving environmental management. The Environmental Institutions Development Project supported the work of the national environmentalcommission (CONAMA) to update legal regulations, develop procedures and guidelines for environmental assessments, sponsor educational campaigns and develop information systems. There are environmental units in ten ministries and a solid track record inimpact assessment, policy analysis and information systems. By 1999, norms were approved for 14 different sectors of activity. CONAMA still faces major challenges inpromoting enforcement and improving natural resource management inkey sectors closely linked to important extractive industries. Other safeguardpolicies 53. The indigenous peoples safeguard policy i s triggered by this project (Operational Directive 4.20). The technical assistance loan includes several activities designed to ensure that Chile Solidurio reaches and i s effective among these groups, including special studies, training social workers on how to work with indigenous peoples, and the development of indicators to measure the coverage and effectiveness of the Program among the indigenous population. These activities are described inthe Indigenous Peoples Development Plan (IPDP), a summary of which i s inAnnex 10. MLDEPLAN prepared the IPDPand it was approved by the Board of Directors o f CONADI. The consultations described earlier included areas o f the country where indigenous groups account for a significant share of the population. Duringproject preparations, additional discussions were carried out with the technical staff of MIDEPLANresponsible for indigenous issues, Chile Solidurio staff working with indigenous groups, and members of the CONADIBoard. The IPDPwas made available at the Info Shop on October 23.2003 17 (Image Bank, IPP-62), and in Chile on the MIDEPLAN website (www.mideplan.cl.) on October 10,2003. Policy Exceptionsand Readiness 54. No policy exceptions are required. The project isjudged ready for implementation. The financial management and procurement arrangements have been agreed and are in place. Key project staff (inparticular, the project coordinator) were mobilized prior to appraisal. Sufficient funds have been allocated in the draft 2004budget. The first year's procurement planhas been prepared andsubmitted for approval to the Bank. The indicators to be used for monitoring and impact evaluation have been agreed and the work for the impact evaluation has started. 18 Annex 1 Country and Sector Background Country Background 1. While Chile's economic performance was less affected by negative regional developments than many of its neighbors, growth did slow in 2002 to only 2 percent (down from 3 percent in 2001). This deceleration was driven by stagnating investment and a fall inconsumption. Nevertheless, the economy began to revive towards the end o f 2002, and by June 2003 growth stood at 3 percent as compared to a year earlier. 2. This growth is expected to be sustained by an expansion of exports as a result of somewhat greater dynamism inthe international economy, improved copper prices, the entry into force o f the free trade agreement with the European Union, and by some strengthening indomestic demand helpedby Chile's currently expansive monetary policy. The central bank's inflation targeting policy has kept inflation within the 2-4 percent band, ending 2002 at 2.8 percent, and projectedto stand at between 3 and 3.5 percent at the end of 2003. 3. Since 2000, Chile has been able to implement a counter-cyclical fiscal policy, which permits deficits in years of slower growth that are recouped when the economy i s stronger. Under this policy, the government keeps its expenditures to a level that would give a fiscal surplus of 1percent of GDP if output were expanding at its full potential and copper prices were at their long-term average. The sluggish economy took its toll on public finances in 2002, which ran a deficit of 1.2 percent of GDP, which translates into a structural balance of 0.7 percent o f GDP, in line with the rule. The 2003 budget provides for a small decline inthe deficit to 0.9% of GDP, consistent with a structural fiscal surplus of 0.8 percent of GDP. 4. The essential challenge facing Chile is a return to fast economic growth and lower unemployment. Chile continues to emphasize the importance of trade and direct investment to the growth and evolution of its economy. The resumption o f rapid growth will continue to depend on improvements in global economic prospects which would encourage exports and foreign direct investment. Fundamental economic and policy conditions in Chile, as summarized by credible monetary policy, rules-based fiscal policy and a flexible exchange system, already provide a strong foundation to support rates of growth over 4 percent. To buttress its foundations for growth, Chile has continued to promote an impressive reform agenda to tackle domestic obstacles to rapid growth and to place itself in a stronger position to reap the benefits of a global upturnwhen it materializes. 19 PovertyReductionStrategy 5. Chile has achieved substantial success in reducing poverty. For almost the entire period from 1987-2000 poverty inChile declined. The share of the population below the poverty line fell from 40 percent in 1987 to slightly under 16percent by 2000. The share of the population below the extreme poverty line fell from nearly 13 percent in 1987 to about 4 percent in 1996, where it has remained. The rapid decline inpoverty was mainly associated with economic growth and an increase intargeted social spending. Nevertheless, the Government has been concerned that the share of extremely poor has not declined. 6. Analytical work suggested that an important determinant of persistent extreme poverty i s exclusion from a variety of networks that provide access to public and private supplied risk mitigation instruments. With few exceptions, inalmost every stage of the life cycle, risks to earnings capacity andearned household income are highest among the poorest groups. Further, while Chile's households are relatively well coveredby social protection programs, and the beneficiaries of key targeted interventions tend to be in poorer groups, gaps incoverage (of contributory pensions andhealth care, inparticular) are apparent among the poorest and inrural areas. 7. In its last poverty report for Chile, the Bank suggested that the Government be more proactive inits poverty reduction and social protection policies. Analysis inthat report as well as inthe report, Household Risk Management and Social Protection, indicated that a new set of policies and interventions-buttressed by institutional reforms to correct targeting errors andto mainstream monitoring and evaluation practices - might be required to reach Chile's poorest groups and increase the effectiveness o f social policies. Although Chile's social protection institutions are relatively strong andwell run, several weaknesses inthe system may make it harder to address exclusion. These are: (i) the inefficient use o f available information; (ii) weakness of the targeting instrument; (iii) gaps inmonitoring and evaluation of social programs and policies; and (iv) insufficient coordination. 8. Use ofInformation. Chile has more information and better data on social protection programs at its disposal that most other countries inthe region. What i s missing inChile are the critical links between data bases on receipt o f social transfers; employment and earnings; taxation and compliance; and the civil registry. Such links allow governments inOECD countries to accurately identify the poor, weed out tax evasion, andmonitor the impact of their policies. 9. TargetingInstrument. The Ficha CAS proxy means test is the most widely used targeting device in Chile. Data on over 5 million households have been collected with the Ficha CAS and are held by MIDEPLAN. Analysis for the Bank's last poverty report (World Bank, 2001) showed that the targeted social programs in Chile cover a relatively smallpercentage of the population inpoverty. The most extensive program, family allowances, only reached about 32 percent o f the poorest quintile o f the population. Furthermore, there are leakages from targeted programs to the non-poor. O f the 20 beneficiaries o f the family allowances, about 66 percent are poor, and about 54 percent of the beneficiaries of non-contributory pensions are inthe lowest quintile. Although the instrument has been successful inidentifying many of the poor, this is mainly done at the moment that an individual applies to receive a particular program. Data i s not updated often enough, thefichu CAS misses some poor people, anddata i s not cross-checked with other sources o f information. MIDEPLANhas undertaken a thorough evaluation of the FichuCAS to identify and correct weaknesses. The proposed technical assistanceloan would support these efforts. 10. Monitoringand evaluation. The monitoring and evaluation of social programs also needs to be strengthened inChile. There i s the sense that there has been a proliferation of sometimes overlapping, redundant and weakly targeted programs inthe line ministries, in partbecausenot all programs have been subject to critical review. Current laws require programs to be evaluated to receive continued support inthe annual budget. There i s a well equipped and trained monitoring and evaluation unit inthe Finance Ministry. However, monitoring and evaluation needs to be extended to additional programs. 11. Coordination. Aggravating these weaknesses, there is no single government agency that broadly coordinates social policy (Le. that supervises data collection; sets standards; determines eligibility; or evaluates social programs) Although MIDEPLANwas explicitly given this role inits original mandate, the Ministry has lost much of its power andcapacity. The Government hasdecided that the country needs a strong institution to coordinate social policy, set standards, propose norms, manage agreements between agencies, and conduct regular reviews of eligibility of beneficiaries, as well as detect overlap inits social programs. 12. Municipalities and Civil Society. Greater efficiency and sustainability would be brought to the social protection system by a clearer allocation o f powers, roles and responsibilitiesbetween central and municipal authorities inthe formulation and implementation of social policy and programs. Finally, there are few linksbetween Chile's social protection programs and policies, and non-governmentalcommunity organizations. Civil society in Chile could play a greater role in implementing social programs and policies, especially inbridgingthe divide between the poorest and the publicly supplied transfers and services to which they are entitled. Greater involvement of civil society could help the Government to correct some o f the targeting and monitoring problems, and to expand access to the social protection system. ProgramBackground 13. InMay 2002, the Lagos Administration announced the Chile Solidario initiative, a package of legislative and administrativereforms to Chile's poverty reduction and social protection policies. The package of reforms represent a concerted effort to bringChile's 225 thousand poorest households out of indigence poverty. The Chile Solidario package includes both new legislation and changes incurrent laws that imply significant changes inthe Government's approach to confronting indigence andextending social protection. 21 14. The policy reforms, will, inter alia: (i) Institutean outreach strategy to the indigent, connecting many who were previously excluded from the social protection system; (ii) Widen the focus from the individual to the family unit; (iii) Shift from a piecemeal approach by better integrating existing social services and cash transfers, and create a new temporary conditional cash transfer for the poorest families that choose to participate; (iv) Eliminate quotas and rationing of benefits for the poorest; (v) Connect excluded groups to the public and private network o f services; (vi) Reduce the number of intermediaries between the providers and beneficiaries of social protection interventions; and (vii) Act as a catalyst for new targeted interventionsinother social sectors. 15. The Chile Solidario initiative has several distinguishingfeatures. A starting premise is that the principal asset of indigent households is their desire to live as a family and the intra-household mutual support that this includes. Thus, the preferential access to Chile's social protection system created under the Chile Solidario reforms targets households/families, rather than individuals, currently classified as indigent. The initiative seeks to overcome the isolation andexclusion of many indigent by actively promoting assistance and protection. Armed with the data identifying Chile's poorest, social workers go door to door, andinvite indigent families to participate in the two-year program of social support. The approach to these families also tries to promote within these families self-initiative and the development of strategies to improve their situations, and address specific needs which are different for each family. 16. Chile Solidariobuildson the Puente (Bridge) program piloted by FOSIS in early 2002. Puente acts as the entry point to the social system for the 225 thousand indigent households. If the identifiedhousehold agrees to participate inthe Puente Program, the case worker helps the householdto identify its needs in seven areas: health; education; employment; housing; income; family life; and identification. The household and the case worker then draw up a strategy for how these needs will be met, and how progress will be monitored over the two year duration of the program. 17. Participatinghouseholds receive the newly created Bono de Proteccion Familiar, a conditional cash transfer, intended as an additional incentive to participate in the Puente Program. Households that participate andthen graduate from the Puente Program are guaranteed access to all the non-contributory transfers to which they are entitled. The new conditional BPFi s set at Ch$10,500 per month for the first six months of the Puente program, decreases to Ch$8,000 inthe second six months, then to Ch$5,500; and finally to an amount equivalent to the usual family allowance for the last six months. Participatinghouseholds are granted preferential access to all of Chile's public interventions related to the seven areas specified. For example, inhealth, the households inthe Chile Solidario initiative are given priority accessto primaryhealth care under FONASA. Inthe area of employment, heads of targeted households will be the priority beneficiaries of active employment programs administered b y FOSIS and the Ministryof 22 Labor. Inthe area of education, schools attendedby members of targetedhouseholds will receive special schoolretention vouchers recently introduced by the Ministry of Education. 18. Inaddition to identifyingthe householdsthat would be contactedby the case workers, MIDEPLANis coordinating efforts with other line ministries involved in delivering the payments and services guaranteedto targetedhouseholds. An integration of different databasesused by various public agencies, as well as those administeredby the civil registry andtaxation agencies, will become increasingly critical to ensure that the initiative i s property targeted andcoordinated. Effectiveimplementation of the reforms linkedto Chile Solidario will require a strong monitoring and evaluation system, including participatory methods involvingcivil society. An additional institutional change impliedby Chile Solidario i s the expansionof the role of municipal governments inthe implementation of social policy anddelivery of social services. For example, although 44% of case workers are contractedby FOSIS, the rest (the majority) are municipalemployees. 23 Annex 2 Major Related ProjectsFinanced by the Bank and other Agencies Sector Issue Project Latest Supervision (PSR) Ratings (Bank-financed projects only) Implementation Development Progress (IP) Obiective (DO) Bank-financed Social risk Lifelong Learning S S reduction, social and Training analysis and (Ch-7 1060) monitoring Decentralization, Public Expenditure S S Strengthening Management program evaluation (Ch-71410) Municipal Municipal S S governance and Development institution-building, (Ch.-44290) Education and health sector perf. Other development Agencies Indigenous peoples Origines (IDB) develoDment 24 Annex 3 ResultsFramework and Monitoring B. ResultsFramework Project Development Objectives Outcome Indicators Use of Results Information Support the Borrower's efforts *No. of families invited to YR1 Check coverage of to Implement Chile Solidario participate in Chile Solidario proxy means test and andlay the basefor a national estimate base-line for system of social protection. *No. of families participating coverage in Chile Solidario YR2 Monitor pace of families entering Puente *No. of families receiving the and fulfillment of Bono de Proteccion Familiar minimumconditions, monitor changes in *% of coverage of social baseline coverage rates programs andmonetary YR3 Monitor changes in included in Chile Solidario baseline coverage rates; among the neediest families, Feed into evaluation and according to theficha CAS strategy for reforms of social motection svstem Intermediate Results Results Indicator for Use of Outcome Each Component Monitoring Component One: Component One: Design and implementnational No. of institutions YR1 Finalize estimate of information system for social (databases)agreeingto total number of protection Exchangeinfo./ institutions that should Total no. of institutions exchange information (databases)withwhich desire YR2 Develop strategy to to exchange information integrate additional data bases YR3 Monitor functioning of system No. of variables incorporated YR1 Estimate no. of into information variables to be ;ystem/Total number of incorporated basedon variables planned to be diagnostic study ncorporated YR2 Develop strategy to incorporate more variables YR3 Monitor functioning of system Vo. of institutions adhering to YR1 Develop standards 25 proposed standarddno. of and estimate timing of institutions with which adherence for institutions desired to exchange YR2 Develop strategy to information promote adherenceby additional agencies YR3Monitor functioning of svstem Component Two: Component Two: Component Two: Social workers are better % of Puente social workers YR1 Plan training prepared to work with Chile trained strategy Solidario families, including YR2 Ensure workers are indigenous receiving adequate training YR3Qualitative study of results of training Strengthen Borrower's Amount of material known Y R l Use to measure ministerialand sectoral on particular theme before knowledge gaps capacities at the center and course/Amount of material YR2Use to measure regional levels to implement, known on particular theme effectiveness of training develop, and monitor the Chile after the course YR3Use to measure Solidario systemof social effectiveness of training protection No. of courses receivinga YRl Use to measure grade superior to satisfactory quality and make needed by participants/total no. of changes courses given YR2 Same YR3 Same Component Three: Component Three: Component Three: StrengthenBorrower's capacity to quantify the impact of the Chile Solidario System: (1) Designintegrated system to monitor No. of programs includedin YRl Review design managementprocesses monitoring systerdtotal no. YR2 Develop strategy to and partial results of the of potential programs include more programs Chile Solidario system; YR3 Monitor functioning of system No. of users satisfied with YRl Reviewdesign systemho. of total users YR2 Monitor and make changes as needed YR3 Monitor andmake (2) Evaluation of selected changes as needed programs of the Chile Solidario System Carry out 5 program YRlCarryout evaluations evaluations per year YR2 Incorporate results 26 andstart new ones YR3Incorporate results of new evaluations and complete rest YRl Test process No. of seminars organizedto YR2 Ensure complete discuss results/total no. of coverage evaluations YR3 Monitor results YR1 Test process No. of reports on status of YR2 Ensure complete implementation of coverage and plan follow- results/total no. of evaluationsUP YR3 Monitor results (3) Carry out impact evaluation of the Chile Carry out surveys necessary YRlCarry out survey, Soliario System for impact evaluation; agree work on intermediate on final design evaluation; YR2 - incorporate results of intermediate evaluation; carryout survey; YR3 - incorporate results of impact evaluation YR1 Agree on TOR YR2 Complete pilot YR3 Incorporate results (4) Design and implement pilot project of social Agree on TOR and carry out accountability for the pilot Chile Solidario System Component Four: Component Four: Component Four: Strengthen capacity of Successful creation of 4 YRl Establish units and MIDEPLAN supporting unitsfor technical begin work work YR2 Monitor results on MIDEPLANcapacity and results with management of Chile Solidario System YR3 Review/Discuss implications for changes inthe institutional structure of MIDEPLAN *Monitoring Indicators for the Social Protection Sector Adjustment loan, associated with Chile Solidario. Includedfor reference only. 27 Arrangements for ResultsMonitoring 1. There are two aspects to results monitoring within the technical assistance project. First,the project includes support to carry out of animpact evaluation of the Chile Solidario System. Second, there would be a system of monitoring of all of the activities supported by the project. Design of an Impact Evaluationfor Chile Solidario 2. Inorder to orient the direction of all the evaluations -impact, program, monitoring, supervision -MIDEPLANhas defined the final and intermediate objectives, and the outputs of the Chile Solidario System. Thefinal objectives are the following; 0 Reduce extreme poverty inthe country 0 Raise the quality of life and welfare of indigent families 0 Raise the level of income of indigent families 3. The intermediate objectives refer to the changes inthe behavior o f the participating families that are expected to be produced once they have gotten access to services at the local level and have assimilated the facilitating and promotion objectives of the intervention. These include: 0 Raise the human and social capital of the participant families 0 Raise the economic and social capacities of the participant families by increasing the coverage of educational and training services inthe families 0 Raise school retention rates and school completion rates 0 Raise the access of indigent families to social andproductive programs 4. Outputs include the number of family protection bonds issued, the preferential access to monetary subsidies, and the preferential access to social promotion programs. In addition to quantity, the technical quality of the goods and services delivered would be monitored. Methodology of Impact Evaluation 5. The design o f the impact evaluation of Chile Solidario was agreed between the Bank and the Government during project preparation. The mainelements are described inthis following paragraphs. More detail i s available inthe project file. The mainhousehold survey instrumentin Chile (CASEN) would be carried out inNovember 2003. Several questions have been added to the survey to identify families who have completed the proxy means instrument survey and all those participating in Chile Solidario. This will enable the identification of a sub-sample of Chile Solidario families and to know when they began their participation and as well to identify a sub-sample of non-participating families who could serve as a control group. Inboth 2004 and 2005, the same survey instrument will be applied to both groups of families, with the addition o f some retrospective questions in 2004. In2006, the full CASEN would be implemented again 28 and that would provide the data needed for the final impact evaluation. The sample o f families and controls (averaging 15,000 per year) would be representative at the regional level. 6. The control group would be chosen among the following: 0 Families close inthe proxy means instrument score and within the same region, relative to current Chile Solidurio participants 0 Families who would enter Chile Solidurio inthe future (entering in 2004, 2005, 2006). 0 Families whose score differs only slightly from the score of Chile Solidurio participants, but who arejust above the cut-off score. Qualitative Research 7. There i s a lack of international evidence on how long it will take to produce the desired impact from the Chile Solidurio Program. Thus it i s planned under the project to carry out complementary studies focused on the participant families, that would permit a better understanding of the processes that influence the impact of the intervention, the dynamics o f poverty, the vulnerability o f the families in extreme poverty inthe face of shocks, the differences inimpacts between the waves of entering families, and the impact on specific groups, for example female-headed households, or indigenous families. Another set o f studies would examine changes in the way public and private services are managed at the local level after the introduction of Chile Solidurio. 29 Annex 4 Detailed Project Description Component 1: National Information Systemfor SocialProtection (US$4.0 million, including contingencies) 1. The Government of Chile has improvedits management of social information. However, this has occurred in an independent manner and technical capacities vary among agencies. As a result, there are errors inthe targeting of social spending andother inefficiencies inpublic spending. MIDEPLANhas been made responsible for designing and implementing a national information system for social protection to use as a strategic tool for social policy and, inparticular, the Chile Solidurio System. The new system would address current limitations of the lack of communication, articulation and dialogue between the different systems of information, managedby different agencies, by advancing the concept of a holistic design for the gathering, handling, and management o f data related to the social and economic characteristics of individuals. Inthe first phase, the system would cover all families participating in Chile Solidurio. It would then expand to include families participating in all social programs, and finally, cover the total population. Chile would take advantage of moderntechnologies in hardware, software, and communications to promote the interchange of information on the civil, social, and socioeconomic attributes of the current population and potential beneficiaries of social programs in Chile. 2. The specific objectives of this component are: Contribute to better targeting and implementation of social programs andpolicies through the generation and more systematic availability of timely information, validated and kept up to date; Establish the standards necessary for the coordination and articulation of the different institutions inthe network of social programs with the perspective of systematic and continuous interchange of information; Establish the legal and administrative guidelines for all government organizations, that coordinate, administer and utilize information about individuals, protecting the right to statistical secrecy; Take advantage of the best instruments of software and hardware for the entry, modification, reading and tracking of information; Administer the information of the ChileSolidurio System inorder to contribute to its effective implementation; and Facilitatethe access to the public, civil society, and researchers of social information. 3. The component i s being carried out under the umbrella of the Gobierno electronic0 initiative announced by the Government in May 2001. The overall objectives of the 30 initiative are to use information technology and communications to improve the information services offered to citizens, increase the efficiency and effectiveness o f public management and to increase substantially the transparency o f the public sector. 4. The national information system for social protection would have several important characteristics. It would be virtual -the links between data bases are logical, not physical. It would be dynamic. The characteristics of individuals change frequently, thus the system must be able to capture the most up to date data. It would be autonomous. Each institutionintegrated within the system would maintain their independence and control over their own information. It would be scaleable and integrated. The system would expand gradually, both interms of the variables covered and the groups of population for whom information i s available. The system would also be linked to institutional development. The component allocates resources for the preparation and training of the staff of MIDEPLAN, as well as other institutions so that they can link fluidly to the system. 5. Implementationof the system would take place in stages, some of which are overlapping: 1. Participate inthe Committee of Electronic Government (ongoing). 2. Prepare a diagnosis of the different institutions and their data basesincluding the characteristics of the information, users of the data, inter-relations between institutions, scarcities and overlapping of information, legal impediments to the use o f data bases and individual information. 3. Construct a structure of interchange and a model for the standardization of information. 4. Define the conceptual design, physical logic and start the System (including modeling, design, construction and starting the software applications). 5. Establishthe agreements with other public agencies, protocols, and legal norms. 6. Adjust the information to the technological model. 7. Administer the project and undertaketechnical inspections (throughout all phases). 6. The national information system for social protection would be administered by a unitlocated inthe Department of Social Information, one of 3 departments of the Social Division of MIDEPLAN. The project would finance consulting services necessary for the design of the system, andthe development of the procedures, standards, and rules governing its operation, software applications, necessary computing equipment and supporting services, training of staff inboth MIDEPLANand in other agencies, as well as the carrying out of a public information campaign on the system. Component 2: Training to Support Chile Sulidariu (US$1.7 million including contingencies) 7. The objective of the component is to support the efficient and effective implementation and management of Chile Solidario by strengthening the capacity of the 31 staff of MIDEPLAN,and of other agencies and levels of government (sub-component l), as well as o f those who are directly working with the participant families (sub-component 2). The component will be managedby a unit within the Department of Social Policy Development in the Social Division of MIDEPLAN. The staff will cover the areas of poverty reduction strategies, training ininformation technology, social programs, and curriculum design. The training offered will be orientedtowards the areas incorporated within the Chile Solidurio System and more generally, a national system of social protection. 8. Sub-component 1: Training of Government officials. The activities under the first sub-component include the training of the MIDEPLANstaff related to puttinginplace a social protection system. This would involve workshops to analyze the implementation, monitoring, and evaluation of Chile Solidurio. Training courses would be organized with international and national experts inthe area of social protection, and participation in international seminars would be supported. A series of seminars would be organized to exchange views on the experience of other countries in organizing a system of social protection, as well as on social risk analysis and management. The aim i s to have professionals in MIDEPLANwith the up-to-date knowledge, methodologies, and other tools necessary to carry out the agency's mandate. Training would also be provided to staff inthe sector ministries, at the central and regional levels, that form part o f the structure of the Chile Solidurio System. The training would focus on strengthening capacities inthe area of social protection, and also assisting inthe installation of organizational and functional changes that would be necessary in order to ensure the effective implementation of Chile Solidurio. Trainingrelated to the new national information system for social protection would also be carried out. 9. Sub-component2: Training of Social Workers. The second subcomponent is implementation of a program to strengthen the capacity of the case workers who are working in with the Chile Solidurio families. The interaction of the case worker with the targeted households i s a critical design feature o f the Program. Inorder for them to contribute to the progress of these households in improving their livelihoods, the case workers need to be knowledgeable in many different areas. Recognizing the importance of the role of the individuals who have been contracted or assigned to this work, and based on the experience in implementationduring 2002, FOSIS requested outside support indesigninga "community of learning" which would include several different components, some of which would be supported by the proposed technical assistance loan. This proposal i s aimed to address the weaknesses which have been detected inthe initial work of the case workers andthe insufficient capacity that some o f them have to address the often complex and sensitive situations and problems that arise intheir work with the Chile Solidurio families. Examples are how to work effectively with indigenous households and how to manage the personal stress that accompanies this type o f work. 10. The strategy has several distinguishing features. It stressesteam work and facilitating fluid communication between the different actors implementing the Program. It addressesthe needs for initial training, permanent skills upgrading, feeding back into improvements inthe methodology and organization o f these activities. This requires a 32 combination of different mechanisms for training and the formalization of their knowledge and experience. The system integrates 4 important types of learning activities: 0 Circles of Analysis of Practices inwhich there would be structured communication and interchange of experiences among practitioners at different levels and with different responsibilities. 0 An "Agency" which would facilitate exchanges within the program, including visits to other locations, apprenticeships, the contacts with outside experts and agencies. 0 An "Institute" which would be the focus of technical assistanceprovision to the case workers through courses, seminars, conferences, round tables, usingboth residential and virtual spaces. Inparticular, the Institute would be responsible for coordinating the access o f the social workers to needed outside experts in various areas; and 0 A "University" through which the Faculty of Social Sciences of the University of Chile would open a post-graduate degree for a social work specialty for the social workers with the objective of improving theoretical and practical knowledge, analytical capacity, and learning from practical experience. The instruction would be organized in modules incorporating self-learning, seminars, courses, seminars, andvarious forms of access and connectionvia a technological platform. 11. Trainingof the social workers wouldbe coordinated by FOSIS or other agency satisfactory to the Bank. The agreement between MIDEPLANand FOSIS (or other agency), including the need to ensure that Bank guidelines are followed, would be a condition of disbursement for this component of the project. The proposedtechnical assistance project would finance activities related to the first 3 parts of the system. This would include the organization of training courses, costs associated with exchanges between staff in different areas, periodic workshops for the social workers to discuss issues and themes arising in their work, arrangements for input and advice from national and international experts, and the information platforms necessary to support the system of learning. Component 3: Analysis, Evaluation, and Monitoringof Social Programs and Policies (US$2.8 million, including contingencies) 12. The goal of this component is to ensure the capacity within the public sector of quantifying the impact o f the Chile Solidurio System and of the associated social and economic programs. Also included are monitoring activities, that would permit the adjustment of actions as implementation proceeds. The project would finance (a) the designof an integrated system of monitoring of management, processes andthe partial results of the Chile Solidurio System; (b) evaluations of programs that, forming part of the social protection network, provide benefits and transfers to the users of Chile Solidurio; and finally, (c) the carrying out of an impact evaluation of the Chile Solidario System on the families. The objective of this component i s to implement an integrated system to evaluate the management, processes and impact o f the Chile Solidurio system. 33 13. Inaddition, recognizing the benefits to be derived from the participation of civil society organizations inthe evaluation process, the design and implementation of a pilot project of citizen accountability would be supported under the proposed project. It i s expected that this activity would contribute to generate the space, mechanisms and instruments of social accountability linked to the implementation of the Chile Solidurio System and would favor the generation of social capital among the extreme poor. The activity would be carried out jointly by a civil society organization with experience in poverty alleviation programs andcitizenship accountability, andpossessing local networks and highnational coverage. An academic or research institution, with experience in social program evaluation would also participate to provide technical support. The Government counterpart for the study would be comprised of representatives of the Monitoring and Evaluation Unit o f Chile Solidario,the Department of Social Policy Development, and the Department of Social Inclusion Policies. 14. The technical assistanceproject would finance the necessary consultant services to design and implement the activities described, conduct households surveys related to the impact evaluation, and support qualitative research. Component4: InstitutionalStrengtheningof MIDEPLANandProject Administration(US$6.4 million, includingcontingencies) 15. Inorder for MIDEPLANto carry out its designated role to spear-head the implementation of the new set of policies, a program of institutional modernization and strengthening for the ministry i s required. This process, if successful, would restore MIDEPLAN's role as the coordinator of social policy andprograms inthe country. The technical assistance activities identifiedinclude two major activities. The first i s the installation o f several operating units inMIDEPLANthat to support the operation of Chile Solidario. These units would be responsible for: (i) managing analytical work which would address issues and questions as they arise duringimplementation as more families are covered, they spend more time inthe Program, and eventually "graduate" from it; (ii)organizing training; (iii)supporting the Executive Secretariat for Chile Solidario; (iv) coordinating the integration of information sources; and (v)monitoring the progress of the program. Each of these unitswould contribute to the strengthening of MIDEPLAN's analytical and professional capacity. Within the Department of Social Policy Development, there would be a group focusing on analytical work to inform the functioning of Chile Solidurio and the strategy inregards to social protection issues, in general. There would be 8 professionals located inthis unit which would function as an area for strategic thinkingand policy planning and development. Further, there would be a group of 3 professionals contracted to provide the day-to-day support necessary to ensure the effective functioning of the Executive Secretariat for Chile Solidurio. In addition, a small unit would manage the day to day activities o f the technical assistance loan. 16. The second major activity inthis component i s the carrying out of an organizational/institutional audit of MIDEPLAN's current strengths, weaknesses and needs, and based on that analysis, the formulation of a proposal for redesigning the 34 institutional structure of MIDEPLANso that it can support more efficiently the execution of Chile Solidurio and, more broadly, the coordination and installation of a social protection systemmore inclusive of the extreme poor. The technical assistance project would finance the consultancy services necessary to the establishment of the special units within MIDEPLAN and studies, as well as minor office remodeling. 35 Annex 5 Estimated Project Costs Project Costs by Component Total US $million National Information System for Social Protection 3.70 Training 1.70 Analysis, Evaluation andMonitoring of Social Programs and Policies 2.50 Institutional Strengtheningof MIDEPLAN 4.93 Project Administration 1.49 Total Baseline Cost 14.32 Contingencies .57 .- . Total Project Costs3 14.89 Front-endfee .lo7 Total Financing Required 15.0 Identifiable taxes and duties are US$784,200. The total project cost, net of taxes, is US$14.2 million Therefore, the project cost sharing ratio i s 70 (Bank)/30(Borrower)of total project cost net of taxes. 36 Annex 6 ImplementationArrangements Background 1. The Social ProtectionTechnicalAssistance Project would support the implementation of Chile Solidurio. Linked closely to that overall goal, the project aims to strengthen the role of the Ministry of Planning andCooperation (MIDEPLAN)as the agency leadingthe development and expansion of the social protection system inChile. MIDEPLANwould be responsible for implementation of the components o f the technical assistance project. Inthe process, MIDEPLAN's own capacities wouldbe strengthened. 2. The missionof the Ministry of Planning and Cooperation is to collaborate with the President on the design and application of policies, plans andprograms of regional development; to propose the targets for public investment and evaluate the projects financed b y the State; to harmonize andcoordinate public sector initiatives to reduce poverty; and to guide the international cooperation that the country received andgives. Its strategic objectives are: Collaborate inthe design and formulation of public policies by preparing evaluations and diagnostic studies to inform decision-making of those agencies designing and implementing programs; Contribute to improvements inthe efficient and effective use of public investment resources and to orient that investment so that it responds to strategic national development goals; Evaluate and propose policies that guide and support regional development and decentralization, collaborating with regional governments inthe administration of each region; Contribute to the achievement of equitable social development, supporting the design, management, evaluation, and coordination of social policy, and formulating and proposing policies to generate equality of opportunities, especially for priority groups; Promote scientific research and capacity-building through the training of post- graduate professionals; and Through its related services, contribute to the design and implementationof policies and programs oriented towards groups defined as a priority for social policy. ProjectImplementationArrangements 3. A unit within the Social Division of MIDEPLANwas responsible for working with the Bank team to prepare the project. A professional was assigned to work on each component and another person worked on administrative issues. Once the project is approved, this unit will be convertedinto the Project Implementing Unit for the loan. In 37 order to maximize the role of the technical assistance loan in strengthening MIDEPLAN, implementation will be closely integrated with the technical and administrative units of that agency. The Project Implementing Unit will continue to be located with the Social Division of MIDEPLAN. The head o f the Social Division would be responsible for the overall strategic direction and substantive content of the loan. A project coordinator would handle day-to-day activities andwould be responsible for all operational matters, both within the Project ImplementationUnit and with other unitswithin MIDEPLANand other agencies of the Government. The project coordinator would be the primary contact for the Bank. 4. ProjectImplementationUnit. The objective of the uniti s to ensure the adequate administrative, financial andlegal functioning of the project within the time frame and arrangements agreed with the Bank and to ensure accomplishment o f the objectives of each component. Inaddition to the project coordinator, the unit with have at least 4 other professionals, qualified inthe areas of finance, budgeting, procurement and legal issues. The latter three professionals will be the liaison between the project and the respective unitsresponsible for these areas within MIDEPLANas a whole. Staff inthese divisions will be responsible for most of the daily administrativework related to the project. These professionals will ensure that the carrying out of project activities are consistent with Bankguidelines. An operational manualto be agreed with the Bank would: (i) out lay the structure of the Project ImplementationUnit; (ii) describe how activities would be coordinated within the unit: (iii) define the responsibilities and functions o f the unit; (iii) describe the profiles of the professionals in the unit; and (iv) the mechanisms of coordination with the components of the project, its internal norms, as well as administrative, financial, and budgeting procedures. The Project Implementation Unit will also be incharge of coordinating with the unitsresponsible for the other components and for the preparation of the annual procurement plan. The unit would design a framework to monitor the status o f all project activities, and, more generally, monitor and supervise project implementation. The unit would also be responsible for preparing a communications strategy for the project, which would include a web-site, information bulletins, and regional and local seminars. 5. Responsibility for carrying out each component of the project would reside with units specially constituted for this purpose and located within specific departments within the Social Division. The units responsible for the training and the evaluation components would work within the Department of Social Policy Development. Inaddition, a studies unitwould be located inthe same department. The studies unitwill be responsible for preparingmaterials needed to support the operation of the Chile Solidurio Social Protection System. The studies would provide technical input and diagnostic analysis, in order to detect critical issues and to inform the decision-making of the Executive Secretariat for Chile Solidurio and of MIDEPLAN. MIDEPLANhas identified the content of the studies that would be carried out duringthe first year of the project. The unit responsible for the National Information System for Social Protectionwould work within the Department o f Information. The staffing and terms of reference for the staff to be contracted for these units is contained inthe operational manual andhas been agreed with the Bank. 38 Annex 7 FinancialManagementand DisbursementArrangements Summaryof FinancialManagementAssessment' 1. The Financial Management Assessment found that the financial management of MIDEPLANsatisfies the Bank's minimumfinancial management requirements and that MIDEPLANcan produce the requisite project financial management reports following the procedures agreed to during project preparation. It also concluded that financial management risk i s low, given that the project will operate under the responsibility o f the Finance Department of MIDEPLANandbe fully integrated with the MIDEPLAN financial management systems. MIDEPLANwould confirm that the project specific coding needed to report inthe format of the cost categories andcomponents of the project loan document can be incorporated inthe integratedfinancial management system, and include this and other financial management provisions inthe Operational Manualto be issued by effectiveness. 2. The accounting, budgeting, and treasury operations of the project will be the responsibility o f the Finance Department of Finance o f MIDEPLANandfully integrated, recorded, and processed inthe integrated financial management system established in MIDEPLAN. Transactions processedhere will be exported to an Excel spread sheet monthly where the agreed FinancialManagement Reports ( FMRs)will be prepared along with the certified Statements of Expenditures (SOEs). The movements reportedin the Excel data base will be reconciled to the transactions and balances reported in the integrated financial management system. 3. The operations of the Finance Department o f MIDEPLAN are fully documented in their Finance Administration Manual, there i s proper segregation of duties, andposts are staffed by competent personnel. Additionally, their operations are subject to the on going review of the internal audit department of MIDEPLAN. Audit Arrangements 4. Chile has an excellent record on compliance with project audit requirements; specifically, MIDEPLANreported both satisfactory financial management and audit compliance inthe implementationof the Chile MillenniumProject (Ln.-4466). MIDEPLANhas agreed to contract the Auditor General of Chile to conduct the annual project audit in line with the Guidelines and Terms o f Reference for Audits of Projects with Financingby the World Bank inthe LatinAmerica and Caribbean Region ( updated for the changes in audit policy effective July 1,2003). 1The full Financial Management Assessment (FMA) is archived in the project's permanent file. 39 DisbursementArrangements 5. Inline with procedures followed with other Bank funded operations inChile, and as further examined inthe FinancialManagement Assessment for the proposed project, budget control procedures to which MIDEPLANi s subject indicate adequate arrangements to ensure that the Loan proceeds will be disbursed for purposes intended. A Special Account (SA) of 1millionUS Dollars will beestablished inthe CentralBank of Chile, under the control of the National Treasurer on terms and conditions satisfactory to the Bank (including appropriate protection against set-off, seizure and attachment if it were to be established in a commercial bank instead.). The SA would cover the Bank's share of the average four-monthly eligible expenditures for disbursement categories 1 through 5. Based on monthly projections of the resources neededto effect payments for the project, MIDEPLAN will request the sale of dollars and the deposit of Chilean Pesos into an OperatingAccount inthe Banco del Estado under the control of MIDEPLAN, Department o f Finance. Counterpart funds will be deposited into the Operating Account and mixed with the loan proceeds so one check may be made to suppliers. 6. Depositsinto the Special Account and replenishments upto the authorizedallocation set out inthe Loan Agreement and the disbursement letter, would be made on the basis of Applications for Withdrawals accompanied with the supporting andother documentation as specified in the Disbursement Handbook. The project willjustify uses o f the loan proceeds with documentation and not on the basis o f reports. All disbursements against contracts of works and goods for less than $350,000, consultant firms for less than $100,000, individual consultants for less than $50,000, and training and incremental operating costs would be made on the basis of certified Statements of Expenditure (SOEs). The supporting documentation for the FMRs and the SOEs would not be sent to the Bank but would be retained by the Project ImplementationUnit and made available for inspectionby Bank staff and auditors. 7. Retroactive financing of $500,000 would be available to cover eligible expenditures incurred after July 1,2003, but no more than 12months prior to loan signing. 40 Allocation of Loan Proceeds ExpenditureCategory Amount inUS$ FinancingPercentage Works 196.000 80% of local exDenditures Goods 100%of foreign expenditures,lOO% of Computers, office local expenditures(ex-factory costs) equipment, 1,042,000 and 80% of local expendituresfor other andsupplies items procuredlocally Services 95 % of local and 100%of foreign Consultantandother 6,9 10,000 expenditures services4 Training (a) for PartB.l of the 1,134,400 100% Project (b)for PartB.2 of the 573,600 100% Proiect OperationalCosts 180,000 70% of expenditures madeuntiltwelve months after the Effective Date and not exceedinginthe aggregate $100,000; and30% thereafter Unallocated 568,000 Front-endfee 107,100 Total 10,710,000 Other services would involve data processing, storage, and security. 41 Annex 8 ProcurementArrangements Procurement for the proposed project would be carried out inaccordance with World Bank "Guidelines: Procurement Under IBRD Loans and IDA Credits", publishedin January 1995 (revised January/ August 1996,September 1997,and January 1999);and "Guidelines: Selection and Employment of Consultants by WorldBank Borrowers " published inJanuary 1997 (revised in September 1999,January 1999,and May 2002), and the provisions stipulated inthe Loan Agreement. 1)Procurementmethods:The methods to beusedfor the procurement described below, and the estimated amounts for each method, are summarized inTable A. The threshold contract values for the use of each method are contained inTable B. The responsible body i s the Ministryo f Planning and Cooperation (MIDEPLAN),which will establish a Project Implementing Unit (PIU). Procurementof Works Works procured under this project could include minor constructionworks to adapt existing structures inthe Ministry to provide adequate space for the PIU. N o major contracts for these works are foreseen. Minor civil works, estimated to cost less than US $ 350,000 equivalent per contract, may be procured on the basis of at least three quotations receivedinresponse to a written invitation, which will include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Bank, and relevant drawings, where applicable. The award should be made to the contractor who offers the lowest price quotation and the experience and resources needed to complete the contract successfully. Procurementof Goods Goods procuredunder this project would include computer equipment for the national information system for social protection, as well as office equipment, furniture and supplies for the PIU, totaling US$ 1million equivalent. To the extent possible, contracts for these goods will be grouped into biddingpackages of more than US $350,000 equivalent and procured following InternationalCompetitive Bidding(ICB) procedures, usingBank-issued Standard BiddingDocuments (SBDs). Contracts with estimated values below this threshold per contract may be procured usingNational Competitive Bidding(NCB) procedures and standard biddingdocuments agreed with the Bank. Contracts for goods which cannot be grouped into larger biddingpackages and estimated to cost less than US$ 100,000per contract, may be procured usingshopping (Nationalhternational) procedures based on a model request for quotations satisfactory to the Bank. 42 Selection of Consultants Consulting services will be contracted under this project inthe following areas o f expertise: social policy and programs, design of training, evaluation, information systems, and surveys., Other services would include ones related to data storage, processing, and security. Together, consulting and other services are estimated to cost US$6.9 million equivalent and would be procured usingthe Bank Standard Request for Proposals. Firms Contracts for firms would be procuredusingQCBS except for small and simple contracts estimated to cost US$lOO,OOO equivalent or less that may be procured usingLeast Cost Selection (LCS) method. Individua1s Specialized advisory services (inevaluation, design of social assistance, design of training curriculum, among other areas) would be providedby individual consultants selected by comparison of qualifications o f three candidates and hired in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines, up to an aggregate amount of US$ 2.5 million equivalent. Training: This category does not involve procurement processes. It includes expenditures for cost of travel, room, board andper diem incurredby trainees and other participants inconnection with the training and the course fees charged by academic or other institutions. Training services are estimated to cost US$ I.7 million equivalent. Training to strengthen the Borrower's ministerial and sector capacities at the center and regional levels to develop, implement andmonitor a system of social protection would amount to an estimated US$1.lmillion (Part B.1of the project). Training to strengthen the capacity o f the social workers of Chile Solidario accounts for about US$600,000 (Part B.2 of the project). Operational Costs: Sundry items, office utilities, support staff, and travel of PIUstaff would be financed on a declining basis and procured usingMIDEPLANadministrative procedures which were reviewed and found acceptable to the Bank. The Bank will finance 70% of expenditures made until 12 months after the Effective Date and not exceeding inthe aggregate US$lOO,OOO; and 30% thereafter, up to an aggregate amount o f $180,000. 2) Prior review Thresholds: The proposed thresholds for prior review are based on the procurement capacity assessment of MIDEPLAN andthe project implemention unit and are summarized inTable B. 43 Assessment of the agency's capacity to implement procurement The overall project risk for procurement i s AVERAGE. InJuly 2003, Chile enacted Law 19886 (Procurement Law), which provides the framework for procurement o f supply and service contracts. Current legal regulationpromote transparent and competitive practices andcontains sound provision for contract administration and evaluation. The executing agency for the project will be the Ministry of Planning and Cooperation (MIDEPLAN). A project manager currently staffs the procurement unit of MIDEPLAN with procurement officers for the projects "Origenes" and "Chile Solidario"; and officials incharge of materials and stock, the purchase of airline tickets, telephone maintenance and Internet and vehicles. Inaddition there are two administrative staff, one incharge of MIDEPLANcontracts and one of administrative contracts. A capacity assessmentof MIDEPLAN'sprocurement unit was prepared based on the experience of the personnel with local procedures. The assessment includes a review of the procurement organizational structure of MIDEPLAN and an Action Plan agreed upon duringNegotiations. The Action Planincludes the following aimed at reinforcingthe implementing procurement capacity of MIDEPLAN: (i) hiringa procurementconsultant knowledgeable in Bank procurement policies and procedures; (ii) drafting o f standard biddingdocuments for NCBprocurement of goods and works; (iii) developing a computer based methodology for preparation and monitoring o f annual procurement plans; (iv) developing a chapter within the Operational Manual (OM) for procurement consistent with the procurement provisions in the Loan Agreement; (v) training of at least two weeks for MIDEPLANprocurement staff, and (vi) developing and implementing a project filing system andproviding adequate space. Inorder to reinforce the action plan, aproject launchworkshop will be organizedat an early stage inproject implementation to familiarize the implementing team inthe execution of the project. The workshop will cover procurement, disbursement, reporting and auditing requirements and will be follow-up by training. The General Procurement Notice (GPN) will be publishedby the end of 2003. The principal risks identified inthe assessment are: (i) use of staff inexperiencedin the Bank procurement procedures, (ii) multiple steps (17 steps), prior to the signature of a the contract, and (iii)some existing practices observed inChile that are not inconformity with Bank procedures. The OM will address shortcomings inexisting practices in accordance with the special procurement provisions listed below. A. The following principles of procurement shallexpressly govern all procurementof works and goods under National Competitive Bidding: 1. All documents pertainingto abidshall be submitted at the same time. Bidders shall not be requiredto submit bid securities or other documents inadvance and separately from their bids. 44 2. Contracts shall be awarded to the bidder who meets the appropriate standards of capability and resources and whose bidhas been determined (i) to be substantially responsive to the biddingdocuments and (ii) offer the lowest evaluated cost. to 3. Contracts shall be evaluated without using"the bracketing" to consider a competitive range calculated on the basis of the "official budget". 4. Foreign contractors or suppliers shall not be required to have a representative inChile as a condition for bidding. B. The followingprinciples of procurement shall expressly govern the selection of consulting services: 1. Foreignconsultants shall not be requiredto have a representative inChile as a condition of participation inthe selection process. 2. MIDEPLANshall publicly advertise expressions of interest as the basis for developing short lists of firms. Procurement Plan A Procurement Planfor the first year of implementationof the project hasbeen submitted to the Bank and found to be satisfactory. Frequency of Procurement Supervision Inadditionto the prior review supervision to be carriedout by the Bank, the capacity assessment o f the PIUrecommends one full supervision mission to visit the field to carry out post review of procurement actions. Based on the overall risk assessment (AVERAGE)the post-review field analysis should cover a sample of not less than 1in 10 contracts signed. 45 Annex 8, Table A: ProjectCosts by ProcurementArrangements' (inUS $millionequivalent) a/ ExpenditureCategory ProcurementMethod Total Cost (including contingencies) ICB NCB Other N.B.F bl 1. Works 0.25 0.25 (0.2) (0.2) 2. Goods .4 .625 ,250 1.3 (0.3) (0.5) (0.2) (1-0) 3. Consultants' and other 7.5 2.7 10.2 Services cl I (6.9) 4. Training dl 1.1 1.1 (a)Part B.1 of the Project (1.1) (1.1) (b) Part B.2 .6 .6 (4 (a 5. OperatingCosts e l .8 .8 7. Front-endfee 0.1 0.1 (0.10) (0.1) Total , , I \ I .4 .625 11.27 2.7 15.0 (0.3) (0.5) (9.9) (10.7) Note: a/ Figuresinparenthesisare the amounts to be financedby the Bank loan b/N.B.F.=Not Bank-financed c l Consultantsservices: detailsprovidedinTable A-1 dl includescost o ftravel, room, boardandper diem, and course fees e/ PIU maintenanceandconsumableoffice supplies, materials, rentalo f facilities, incidentalcosts, travel ofproject implementationandtechnicalunits flProcurementarrangementwill dependoncategory ofexpenditure 46 Annex 8, Table Al: ConsultantSelectionArrangements (inUS $million equivalent) Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines),Commercial Practices, etc. N.B.F. =Not Bank-financed. Figures inparenthesis are the amounts to be financed by the Bank loan. 47 Annex 8, Table B: Thresholdsfor ProcurementMethodsandPrior Review (US$ thousands) Expenditure ContractValue Procurement ContractsSubjectto Category (Threshold) Method Prior Review/ EstimatedTotal Value Subject to Prior Review 1. Works <350 Three (3) quotations Firsttwo 2. Goods >350 ICB All c 350 NCB Firsttwo c 100 Shopping Firsttwo 3. Services TechnicalAssistance / Training/ Studies Firms > 100 QCBS All Individuals >50 See SectionV of All (TOR, contract, Guidelines CV) Totalvalue of contractssubjectto prior review: 35% 48 Annex 9 EconomicandFinancialAnalysis Since this i s a technical assistanceloan it i s difficult to quantify the benefits expected to be derived from the activities of the project. Nevertheless, the objective of the Chile Solidario Programis to improve the effectiveness of social policy inChile, including through better targeting in order to reach the poorest and better coordination of existing programs. The proposed national information system for social protection i s likely to yield cost savings through the detection of the participation in social programs of ineligible beneficiaries and of overlapping benefits, as well as the through the development of standards for data-bases within the Government in order to promote more interchange of information. The Government has ensured future financing for the Chile Solidario program by passing legislationincreasing the rate of the value-added tax. In addition, the Government has included an allocation for sufficient funding for the technical assistanceproject in the proposed 2004 budget. The mainrecurrent costs would be associated with the maintenance of the equipment for the national information system for social protection. However, those expenses are relatively small, as equipment purchases constitute a relatively small share of the total project costs. 49 Annex 10 Safeguard Policy Issues 1. The indigenous peoples safeguard policy is triggeredby this project (Operational Directive 4.20). The Government believes that if Chile Solidario i s successful it should have a positive impact on the indigenous population. According to the 2002 census, indigenous peoples account for 5 percent of the population, but 10percent of extremely poor families. Inorder to ensure that Chile Solidario incorporates equally the indigenous, a series of activities are included inthe proposed project to ensure that the methodologies used are culturally appropriate andthat sufficient information is available on the effects of the Program on these families. The Indigenous Peoples Development Plan (IPDP) is available at the Bank InfoShop (Image Bank, IPP-62) and on the website of MIDEPLAN (www.mideplan.cl). A summary i s presented here. Background 2. The indigenous populationinChile, as inother countries, are affected by conditions of poverty and social exclusion. Although the Chilean Government has taken several actions to improve conditions for the indigenous population, much remains to be done. The legal framework i s the "Indigenous Law" passed in October 1993. About 60 percent of the indigenous peoples live in 2 regions (the IX Region and the Region Metropolitana). According to the 2000 CASEN, 40 percent of indigenous households fall inthe bottomquintile of households rankedby income; on the other hand, only 6 percent fall into the top quintile. Indigenoushouseholds are more likely to be employed in agriculture and are more likely to be unemployed than the general population. The rate of illiteracy is twice as highamong the indigenous peoples, as i s the share of those who haven't completedbasic education. Differences ineducational attainment between indigenous and the rest of the population are smaller among younger age groups. 3. The Government, in the framework o f the Indigenous Law, created the National Corporation for IndigenousDevelopment (CorporacidnNacional de Desarrollo Zndigena -CONADI), adecentralized, publicservice, withseparatelegalstatusandautonomy, under the supervision of MIDEPLAN. Since 1994, public policy has been guidedby the Indigenous Law and as such, seeks to establish a new relationshipbetween indigenous communities and the State, based on respect o f their identity and recognition of their rights, and seeking, moreover, to protect their lands and resources. Among the functions of CONADI are the promotion of the integrated development of indigenous communities and individuals, especially as relating to economic, social and cultural matters, andthe promotion of their participation innational life. CONDADI i s directed b y a National Council made up of 5 members representing government ministries, 3 members appointed by the President, 8 indigenous representatives, and a National Director, also appointed by the President. CONADI i s responsible for several programs including the Fundfor Land and Water which provides subsidies for land acquisition, conflict 50 resolution, and the regularizationor purchase of water rights. There are also programs which finance local development activities and education and cultural programs. 4. In2001,the Government established a Coordination of IndigenousPolicies and Programs, under the Under-Secretary of MIDEPLAN, that includes representatives of Ministries with responsibilities over issues that affect this population. The initiative aims to support diverse initiatives and commitments so that they can be carried out efficiently and more rapidly. The Government i s also implementing, with the support of the Inter- American Development Bank, the Origenes Program. This program aims to support the locally-driven development of indigenous communities. The Program is designed to be intersectoral, intercultural, decentralized andparticipative. CulturalAppropriatenessandIndigenousParticipationinChileSolidurio 5. Estimates from the Progrumu Puente (pending information from the recently-added question on ethnicity intheficha CAS) based on surnames of Chile Solidurio participants indicate that through the end of June 2003, indigenous families represent about 11 percent o f the total. This compares with an estimate based on the matching of the data of theficha CAS with the CASEN, of 8 percent of indigenous families qualifying to participate in Chile Solidario. The entry of indigenous families into Chile Solidurio has been designed inphases (as for all households). As of June 2002, all indigenous households inurban areas have entered in accordance with their score on theficha CAS. As of September 2002, households have entered who live inrural areas of Region I, that are not participating inthe Origines Program, and as of November 2002, all households inruralareas of this region. Beginningin2003, families are enteringwho live inrural zones inthe Regions (8,9, and 10) that are benefiting from the Origines Program. 6. The Puente Program incorporatedinto the training for social workers that work with indigenous families inruralareas, specific tools that would ensure cultural appropriateness. This included a prior evaluation o f the characteristics of the indigenous communities by the municipal supervisor, CONADI, and the Progrumu Origines. Specific training i s provided on indigenous themes, local characteristics (geography, key informants), minimumcompetency inthe indigenous language and the behavioral requirements for working with these families and the community. Depending on the reviews of CONADI and the Origines Program, the contact can be made initially with local authorities in order to explain the program, particularly the entry procedures. Work has also been undertaken to adapt the materials used in working with indigenous families. Insome communities, social workers havebeen able to use the same materialsdeveloped for the overall population, but inother cases, they have adapted the materials to increase their effectiveness with indigenous households. Based on the mixed experience inusing the Chile Solidurio materials with indigenous households, it was decided to undertaken an analysis and revisions with a view to improving their effectiveness. 7. When Chile Solidurio began, working groups were constitutedto work on themes related to ethnicity. At the central level, the group is made up of the Sub-secretary of 51 MIDEPLAN, the Executive Secretary of Chile Solidario, the RegionalPlanningOffice, FOSIS, Origines, and CONADI. The functions of these working groups are: Adoption of general definitions with respect to cultural appropriateness of the methodology and the programmatic offerings o f the system; Consolidation of the statistical and geographical information regarding potential participants of Chile Solidurio among indigenous families; 0 Design o f a strategy to reach the families in indigenous communities; and 0 Provision of the necessary information to the regions to implement the System. There are also working groups infive regions, made up of representatives of the Regional planninggroups, FOSIS, CONADI, andthe Progrumu Origines. Their functions include: 0 Consolidate the quantitative and qualitative information relating to potential beneficiaries of Chile Solidurio among indigenous families and the communities to which they belong; Propose, as necessary a re-ordering of the entry of indigenous households, based on an analysis of each community; and Design a strategy to reach the indigenous community based on a case-by- case evaluation. Specific Activities within the IPDP for the Technical Assistance Project 8. Chile Solidurio represents a new phase inthe development of social policy within Chile. Moreover, it has committed the Government to orienting its programs, support andexisting assistancetowards the extremely poor. Given that ChileSolidurio is a universalprogram for the extremely poor, the Government recognized the importance of incorporating elements to guarantee the cultural appropriateness o f the methodology as well as the generation of sufficient information about how the program functions among these groups. The technical assistanceproject includes 11specific activities that would be implementedwith the objective of ensuring the availability of appropriate mechanisms which respect cultural differences and promote the integrateddevelopment of individuals andthe community, at the same time reinforcing recognition and respect for indigenous groups. The IPDPincludes cost estimates, timing, as well as those responsible for carrying out the work. (a) Incorporation into the CASEN Survey to be carried out inNovember 2003, of two questions, that would identify indigenous families andindigenous beneficiaries of Chile Solidurio. This would permit a complete characterization of the indigenous families incorporatedinto the System, as well as those who have not yet entered, and a comparison with the rest of the population. (b) Identificationinthe proxy means instrument (fichu CAS) of whether ahousehold i s indigenous. 52 (c) Identification of ethnic households participating inthe Progruma Puente, the entry point to Chile Solidurio and where the psycho-social intervention with the family takes place. (d) An analysis of which indigenous households do not have afichu CAS, usingthe information from the 2003 CASEN Survey. Subsequently a strategy would be defined with the municipalities where necessary to register those who have not been incorporated. This data would also be used to review the coverage levels assigned to different municipalities. A study on unmet basic needs among the indigenouspopulation usingthe 2002 Census. The Human Development Index for the indigenous population would be calculated usingdata from the 2003 CASEN, replicating the methodology in a previous study for the entire population. Social workers and supervisors in specific municipalities in 3 regions would be trained on theory and methodology designed for the indigenous population. A study would be carried out on the specific demands of indigenous households for public services with the objective of finding out whether public agencies are inapositionto respondrapidly and appropriatelyto these needs. Inthe context of the management, monitoring, andsupervisionof the Chile Solidario System, every six months a bulletin would be prepared that would focus on the ethnic dimension of the program. It would contain data such as: the number of indigenous families incorporatedinto Chile Solidurio; the number of indigenous families invited to participate, but refusing; and the number of indigenous families participating in Chile Solidurio who have receivedmonetary subsidies (SUF,PASIS, SAP). Inevery studyor work proposal under the technical assistanceproject the ethnic dimension would be considered. Specifically, CONADI would elect a representative with technical expertise who would serve as the contact point with the group managingthe project. Each terms of reference or study content would be considered in a seminar with representatives o f CONADI or other technical expert invited to comment on indigenous aspects. Also, CONADIwould be briefed at least once a year by the team inMIDEPLANon the progress and results of the activities contained in the IPDP. Through focus groups, consultations would be carried out with indigenous households participating in Chile Solidurio. The objective would be to verify if the materials and interaction with the Program i s culturally appropriate. This 53 activity would be carried out by province, selectingfamilies by commune among ruralresidents. CONADIwould select the families. 54 Annex 11 Project Preparation and Supervision Pro'ect Schedule PCNReview Initial PID to PIC Initial ISDS to PIC 1Amraisal I 10103 I MIDEPLAN was the key institution responsiblefor preparation of the project. Bankstaff andconsultants who worked on the project included: Name Specialty Theresa Jones Co-Task Manager Truman Packard Co-Task Manager MartinRavallion Impact Evaluation EmanuelaGalasso ImpactEvaluation Paul Sisk Financial ManagementAssessment Maria Lucy Giraldo Procurement Assessment Ricardo Fenochietto Social Protection InformationSystem Jorge Barrientos Project Design and Management EstanislaoGarcitua Social analvsis. DarticiDation.andindinenous DeoDles Project PreparationCosts: US$105,559.7 1(as of November 19,2003) Estimatedadditional costs through Board approval: Negligible Estimatedcost of supervision: $80,00O/per year 55 Annex 12 Documents inthe Project File 1. Proyecto "Integracidn ":Asistencia Tknica,Chile Solidario-Banco Mundial (Septiembre 2003) 2. Andlisis de Resultadosdel Programa Puente 2002, Informe Final, Tom0I, Divisidn de Desarrollo Social, CEPAL (Santiago, Junio de 2003) 3. Sistemade Fomtacidn, Capacitacidn y Acompafiamiento del Programa Puente, FLACSO, Borrador para la discusidn interna, Santiago,febrero 2003-11-17 4. ProcurementAssessment (June2003), MariaLucy Giraldo 5. FinancialManagementAssessment (July2003), PaulSisk 6. Derechos Sociales Bdsicos Superacidn de la Pobreza y Proteccidn social Ante La Vulnerabilidad (Claudia Serrano y Dagmar Raczynski), Asesorias Para el Desarrollo,Mayo 2003. 7. Manual Operacional (Borrador) 8. Informe sobre Consultasa Municipios sobre Chile Solidaropor E. Morales (Abril 2003) 9. Designof ImpactEvaluationfor Chile Solidario (April 2003) by MartinRavallion andEmanuelaGalasso 56 Annex 13 Chile: FinancialRelationswiththe World Bank Statements of Loansand Credits as of September 24,2003 OriginalAmount in US$ Millions Differencebetweenexpected and actualdisbursementsa Project FY Purpose IBRD IDA Cancel Undisb Orig Firm ID 2003 CL-Sciencefor the Knowledge 25.26 0.00 0.00 25.26 0.93 Rev'd PO77282 2002 Economy 23.23 0.00 0.00 19.83 5.10 0.00 PO69259 2002 CL Pub ExpenditureManagement 75.75 0.00 0.00 72.74 15.62 0.00 PO68271 1999 CL-LifelongLearningand Training 145.45 0.00 0.00 56.18 42.47 0.00 PO55481 1999 CL-HIGHER EDUCATION 10.10 0.00 0.00 3.22 3.22 0.00 PO55480 CL MUNICDEVTI1 0.75 Total: 279.79 0.00 0.00 177.24 6734 0.75 STATEMENTOF IFC's Heldand DisbursedPortfolio June 30 - 2003 InMillions USDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1991/93 Aconcagua 0.00 0.45 0.00 0.00 0.00 0.45 0.00 0.00 1999 CBTI 0.00 0.00 0.83 0.00 0.00 0.00 0.83 0.00 1989191/99 Escondida 0.00 0.00 16.66 0.00 0.00 0.00 12.91 0.00 1996 FEPASA 11.60 5.60 0.00 4.68 11.60 5.60 0.00 4.68 2003 LanChile 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994196197 MonedaMgt 0.00 0.13 0.00 0.00 0.00 0.13 0.00 0.00 1994 PioneroFondo 0.00 9.33 0.00 0.00 0.00 9.33 0.00 0.00 1996 ProaFund 0.00 6.64 0.00 0.00 0.00 6.64 0.00 0.00 2000 San Antonio 35.00 3.70 0.00 65.00 24.15 3.70 0.00 44.85 0 TFSA 0.00 4.44 0.00 0.00 0.00 4.44 0.00 0.00 2003 TRANSELEC 60.00 0.00 0.00 0.00 60.00 0.00 0.00 0.00 Total Portfolio: 136.60 30.29 17.49 69.68 95.75 30.29 13.74 49.53~ Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic 2002 San Vicente 0.02 0.00 0.00 0.02 2003 ThamesChile 0.04 0.00 0.00 0.04 Total PendingCommitment: 0.06 0.00 0.00 0.05 57 Annex 14 Chile at a glance 8/26/03 I Latin Upper- POVERNand SOCIAL America middle- Chile &Carib. income Developmentdiamond' 2002 Population,mid-year(mfllions) 15.6 527 331 Lifeexpectancy GNI per capita (Atlas method, US$) 4,260 3,280 5,040 GNI (Atlasmethod, US$billions) 66.4 1,727 1,668 Average annual growth, 1996-02 Population(%) 1.3 1.5 1.2 Laborforce (%) 2.0 2.2 1 8 GNI Gross per primary Most recentestimate (latest year available,1996-02) capita nrollment Poverty (% of populationbelownationalpoverfyline) 17 UrbanpopulationP? of totalpopulabon) 86 78 75 Lifeexpectancyat brth (years) 76 71 73 I Infantmortality (per ?,OWlive bfrths) 9 27 19 Child malnutrition(% of children under5) 1 9 Access to improvedwater source Access to an improvedwater source (46 ofpopulation) 93 86 Illiteracy/"' ofpopulabon age 154 4 11 7 Gross pnmaryenrdlment (% of school-agepopulation) 103 130 105 Male 104 131 106 Female 101 128 105 KEY ECONOMIC RATIOSand LONG-TERMTRENDS 1982 1992 2001 2002 GDP (US$bfllions) 24.3 41.9 66.5 64.2 Economicratios' Gross domestic investmentlf;DP 11.3 23.8 20 7 Exports of goods and sewices/GDP 19.4 30.7 34.7 Trade Gross domestic savings/GDP 9.4 25.2 22.7 Gross nationalsavingslGDP 21.5 19.8 T Currentaccount balancelGDP -9.5 -2.3 -1.9 InterestpaymentdGDP 8.0 2.7 2.7 2.5 Domestic ~ Investment Total debffGDP 71.1 45.7 57 8 63 0 savings Total debt service/exports 20.8 29.5 33.1 Present value of debffGDP 56.8 .. I 1 Presentvalue of debffexports 167.2 Indebtedness 1982-92 1992-02 2001 (average annualgrowth) GDP 6.8 5.0 2.8 2.1 -Chile GDP per capita 50 3.6 1.5 0.9 Upper-middle-incomegroup Exports of goods and sewices 9 7 8 8 9.7 STRUCTUREof the ECONOMY 1982 1992 2001 2002 1 Growth of ("A of GDP) investmentandGDP(%) h Agriculture 5.5 9.9 8.8 20 Industry 34.7 38.1 34.3 0 Manufacturing 18.5 20.5 15.8 Sewices 59.8 52.0 56.9 -20 Privateconsumption 75.3 65.2 65.3 -40 1 General govemment consumption 15.3 9.7 12.0 Imports of goods and services 21.3 29.3 32.7 -GDI -GDP I 1982-92 1992-02 2001 2002 (average annualgrowth) 1 Growth of exports and imports(%) h Agriculture 7.4 1.8 6.5 20 Industry 5.7 5.1 2.1 i o Manufacturing 6.4 3.1 -0.3 Services 5.7 3.6 2.9 0 Private consumption 5.4 5.8 3.0 -io General povemmentconsumption 1.5 3.6 2.7 -20 Gross domestic investment 14.6 5.0 -13.8 importsof goods and setvices 9.4 8.4 -1.3 Note: 2002 data arepreliminaryestimates. This tablewas producedfrom the DevelopmentEconomicscentraldatabase. * The diamondsshowfour key indicatorsin the country (in bold) comparedwith its income-groupaverage. If data are missing, the diamondwill be incomplete. 58 Chile PRICES and GOVERNMENT FINANCE 1982 1992 2001 2002 I Domesticprices Inflation (%) ph change) l5T Consumer prices 9.9 15.4 3.6 3.0 10 ImplicitGDP deflator 8.5 11.8 1.5 2.6 Governmentfinance 5 (% of GDP,includes currentgrants) 1 "I 0 Current revenue .. 22.9 22.8 22.8 97 98 99 W 01 Current budget balance 5.0 3.2 2.4 Overall sumluddeficit .... 2.3 -GDPdeflator "CPI -0.3 -1.I TRADE 1982 1992 2001 2002 (US$ millions) Exportand import levels (US mill.) I Total exports (fob) 3,706 10,007 18,050 19,133 Copper 1,685 3,886 6,746 7,151 25sW0 1 Fruits 375 1,005 1,116 1,182 Manufactures 1,207 4,031 9,070 9,614 Total imports (ci9 4,094 10,183 16,334 17,151 Food 590 Fueland energy 632 1,138 2,589 2,718 I Capitalgoods 697 2,540 3,418 3,589 Export price index (1995=100) 75 65 68 96 97 98 99 00 01 Import price index (1995=100) 86 117 127 Exports Imports Terms of trade (1995=100) 87 55 53 O2 BALANCEof PAYMENTS 1982 1992 2001 2002 (US$ millions) Currentaccount balanceto GDP (%) Exports of goods and services 12,364 22,315 23,019 Importsof goods and services 11,820 21,221 20,619 Resourcebalance ...... 544 1,094 2,400 Net income -1,881 -2,757 -2,808 Net currenttransfers .... 378 422 -529 Current accountbalance -2,304 -957 -1,243 Financingitems (net) .. .. 3,455 2,363 Changesin net reserves -2,498 -1,120 -1,165 Memo: Reserves includinggold (US$ millions) .. 9,009 16,331 17,495 Conversionrate (DEC, local/US$) 50.9 362.6 634.9 688.9 1 EXTERNALDEBTand RESOURCEFLOWS 1982 1992 2001 2002 (US$ millions) Composition of 2002 debt (US mill.) Total debt outstandingand disbursed 17,315 19,134 38,398 40,432 IBRD 200 1,928 728 555 A: 555 IDA 20 13 7 6 Total debt service 3,676 2,693 6,648 7,702 iBRD 28 312 182 252 IDA 1 1 1 1 Compositionof net resource flows Officialgrants 7 56 23 0 Officialcreditors -69 54 -121 -313 Privatecreditors 1,497 532 1,461 1,385 Foreigndirect investment 401 935 4,476 0 Portfolioequity 0 338 -219 0 F 36.400 World Bank program Commitments 0 313 0 0 E. Bilateral Disbursements A IBRD 32 200 39 28 B IDA -- D Other multilateral - F .Private Principalrepayments 14 168 119 202 C-IMF G .Short-term Net flows 19 32 -81 -175 Interest payments 15 144 64 50 Net transfers 3 -112 -144 -225 Note: This table was produced from the Development Economicscentral database. 8/26/03 59 MAPSECTION