Mexico - Initial Education Project

Document of The World Bank FOR OFFMCIAL USE ONLY i-i: :1 r. . P.;. t .cA'YIva I~+3 Rport No. P-5836-M NEIRAUDUM AND OF THE PRESIDENT OF THE BAK FOR RECONSTRUCTION ANDDVEOEN TO THE EXECUTIVE DIRECTORS ON A PROPOSED LON IN THE AIDNT EQUIVALENT TO US$80 KILLION TO NACIONAL FINANCIERM, S.N.C. 111TH THE GUARANTEE OF THE UNITED MEXICAN STATES FOR AN ITIA EDCaf[ON PROJECT August 10, 1992 Country Department II Human Resources Operations Division Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by ecipients only in the performance of their oficial dutie Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENTS Currency Unit r= -so (IMex$) US$1.00 = 3,108 Pesos (August 1992) FISCAL YEAR January 1 - December 31 ACADEMIC YEAR September 1 - June 30 UNITS OF WEIGHTS AND MEASURES Metric US/British Equivalent i kilogram (kg) = 2.20 pounds Ob) I metric ton (m ton) = 2,250 pounds 1 liter ) = 0.26 gallons (gal) i kilometer (km) = 0.625 miles GLOSSARY OF ACRONYMS EMIS Educational Management Information System EMP Education Modernization Program (Programa de Modemizaci6n Educattva) ICB International Competitive Bidding ISSSTE Institute of Security and Social Services for State Workers (Instituwo de Seguidad y SerWcaos Sodales de los 7rabajadores del Estado) LCB Local Competitive Bidding NAFIN National Financing Company (Nacional Financdera, S.N.C.) PCC Pro-hildhood Committee PCU Project Coordination Unit SEP Public Education Secretariat (Secretarta de Educd6n Pdblica) SPES State-level Public Education Secretariats UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific & Cultural Organization UNICEF United Nations Children's Fund  FOR OMCLFCL USE ONLY IllIXAL EDUCATION POIC LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.N.C. (NAFIN) Guarantor: United Mexican States Beneficiaries: Public Education Secretariat (SEP) and state-level Public Education Secretariats (SPES) in ten selected states Amount: US$80 million equivalent Terms: Repayment in 15 years ircLuding 3 years of grace at the standa.-d variable interest rate Financinu Plan: Local Foreign Total -US$ million- Government of Mexico 34.0 0.0 34.0 ' -BRD 72.2 7.8 80.0 UNDP/UNICEF/UNESCO 1.0 0.0 1.0 Total Financing 107.2 7. 115 # Excluding taxes and duties of about US$5.0 million Economic Rate of Return: Not Applicable Staff Appraisal Repot: Report No. 10821-ME; dated August 10, 1992 MaE: IBRD No. 23995 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACrONAL MJNANCIERA, S.N.C. (NAFIN) W1TH THE GUARANTEE OF THE UNfTED MEXCAN SrATES FOR AN iNTLAL EDUCATION PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to Nacional Financiera, S.N.C. (NAFIN), with the guarantee of the United Mexican States, for US$80 million equivalent to help finance a project for Initial Education (IE). The loan would be at the Bank's standard variable interest rate, with a maturity of 15 years, including three years of giace. NAFIN would be the Borrower and the Public Education Secretariat (SEP) and state-level Public Education Secretariats (SPES) would be the executing agencies. 2. Bwaco . Poverty remains widespread in Mexico and large regional income disparities persist. The 1982 economic crisis and the ensuing declines in per capita income led to increased poverty and public expenditure cuts in social services. At least 18 million people, or 21% of the total population, live in extreme poverty, 70% of whom are concentrated in rural areas. Because poverty is closely intertwined with low human capital formation, long-term economic recovery in Mexico must rely on the improvement of education, especially basic education among the poor. At present, almost half the labor force has attained less than primary education. Although considerable progress has been made in providing access to basic education (the net primary school enrollment rate is 98%), approximately 300,000 school- age children, mostly in rural and indigenous areas, still lack access to school, and high dropout and repetition rates are common. First-grade repetition is 32% nationwide and 50% in the poorest states. Low stimulation and inadequate health and nutrition of young children are among the factors which subsequently impair their performance at school and their productivity later in the work force. 3. Government Strategy. The Mexican Government's IE strategy to address the need for human resources development and poverty alleviation derives mainly from the Education Modernizaution Program 1989-1994 (EMP), the 1983 ISSSTE Law (Law on the Institte of Social Security and Services for State Workers) and from other official documents. The body of policy statements include IE concept, objectives, modalities (formal and non-formal), national coverage, human resources needed, educational materials to be developed, and institutions to be strengthened. More specific IE policies and actions are summarized in the SAR, and relevant Government statements on IE are atached as Annex 2 of the SAR. 4. One of the strategic programs adopted by the Government to attain TE objectives is the non- formal IE program. SEP has operated its nationwide IE program under two separate modalities, formal and non-formal. The formal program is designed to care for and educate children of working mothers in the urban formal sector-who by law are entitled to day care service-and operates much like kindergarten, with an enrollment of about 158,000 children. The non-formal IE program is oriented toward low-income families (70% of participants are from rural communities with less than 2,500 inhabitants) and, through community educators, teaches child-development skills to parns of young children (ages 0-3). Enrollment in the non-formal IE program reached the peak of 290,300 participants in 1985, but has since eroded to only 183,400 children in 1992, mainly due to lack of adequate funding. The IE program's share of SEP's total budget is only 0.4%, of which about 80% is allocated to the formal IE program, and little if any operational linkages exist between IE and other programs for social services such as health and nutrition. During the latter half of the 1980s, the program has suffered from continuous deterioration in quality and coverage. The Government wishes to revitalize this program and has requested Bank assistance to do so. Already, between 1990 and 1991, SEP's budget for the non-formal IE program was increased by 87%. 5. The non-formal IE program is a distinctive part of the EMP, since it underpins the Government's efforts to improve quality and efficiency of basic education and motivate communities to participate in their children's education. Because the non-fornal TE progran focuses on parents and children of rural and urban margin areas, it targets on poor families' critical educational needs. 6. SEP submitted for Bank assistance, after receiving technical assisance from UNICEF, UNESCO, and UNDP, a ten-year nationwide non-formal IE program that would ultimately cover 3.7  2 - million children in ten years at a totl cost of US$392 million. A modified version of this plan, scaled down to reflect institutional weaknesses and targetng Mexy-o's ten poorest states, is the basis of the proposed JE Project. 7. Proect Objetv. In support of Government policies for human capital accumlation and poverty alleviation, the project aims to improve quality and efficiency of the non-formal EE program and expand poor parents' access to IE programs in the ten poorest Mexican states by: (a) preparing young children of low-income falmilies for timely school entry and for improved primary school attendance and performance; (0) educating parents, especially mothers, in home-based child-development practices; and (c) strengthening the Government's institutional capacity to formulate sectoral policies and plan, expand, monitor and evaluate IE programs. 8. Prqiec Daqcripon. The project would have three main components: (a) Huma Resourc Development (79.2% of total project costs including contingencies) would upgrade the knowledge and skills of all personnel involved in the IE program (technical staff at SEP and SPES, coordinators, supervisors, and community edu.cators), and specifically the child developm.nt skills of parents; (b) Educational Mateials Development (12.9% of total project costs including contingencies) would upgrade instuctional materials to cover new areas (health, nutridon, environment, etc.), present materials more effectively, and develop new supporting audiovisual components; and (c) Institutional Strengthening (7.8% of total project costs including contingencies) would strengthen organization and management capacity at both SEP and SPES levels-including increasing their planning, management, supervision, evaluation capacity, and conducting special studies-while fostering and supporting community participation. 9. The project would centr on the training of parents through periodic group meeings and home visits, with the help of comprehensive illustrated guidebooks and other educational materis, to teach them skills for caring and stimulating children for cognitive, psychological, and social development. Basic health and nutrition education and guidance wotld also be provided, in cooperation with the health system. Parents would be trained by community educators, each of whom would work with 20 families to form a project nucleus. Ten nuclei would make up a module, technically assisted by a module supervisor; and up to ten modules would be monitored by a zone coordinator. Zone coordinators and module supevisors woud t public education sector personnel, while community educators would be locally selected volunteers who would receive a modest but reasonably attractive stipend. Over 90% of community educators are women. Pro-ildhood Commitees (PCCs) would be organized at both state and local levels under the project and would operate as community umbrella organztions for project support, inter-agency coordination, and general child-related advocacy. 10. The total project cost is estimated at US$115 million equivalent, excluding taxes and duties (estimated at US$5.0 million), wih a foreign exchange component of US$7.8 millioi equivalent. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursement, and the disbursement schedule are shown in Schedule B. Retroactive financing of US$5.0 million equivalent would be granted for expenditures incurred after May 1, 1992. A timetable of key project processing events and the status of Bank Group operations in Mexico are given in Schedules C and D, respectively. The Staff Appraial Report No. 10821-ME, dated August 10, 1992, is being distributed separately. 11. Ptoject Implementation and Sustainability. The project would be implemented over a five- year period. Under the ongoing decentralzation process, the Central TE Unit would retain normative and quality control responsibilities, while most adminitratve and operational duies would be carried out by state IE Units. Ihis would not significantly affect the way the non-formal IE program oprates, since most operational activities bave been handled at the state level for the past ten years. The inclusion of educational components and program coverage increase would take place under improved centra, state, and local supervision and evaluation schemes. The sustanability of the project would be enhanced by the project's heavy pre- and in-service traning and instonal stengtening. Creation of an Educatona MmgentInformation System MIS) under the project would increase the capacity of public educaion  -3- insttutions to gather and analyze data and to formulate effiective educational strategies. Additionally, project sustainability would be enhanced through active community participation in the EE program through the reinforcement of PCCs, better stipends and training for community educators, independent quality audits, planning meetings, and annual and mid-term implementation reviews. 12. Lessons From hPwious Bank Involvement. Education sector experience, especially in Latin America, produces the following considerations as key elements to project success: (a) a policy framework with which a project fits in; (b) simplicity of project objectives and content; (c) a decentralized organization for implementation; (d) a well-designed monitoring, testing, and evaluation system; and (e) active community participation. The project has incorporated thwe elements into its design. Since the Bank has not been active in non-formal ET, except as a part of projects, research literature on the experience and impact of ET programs on a worldwide basis has been reviewed as part of project preparation. The arguments in favor of I2 are multifaceted and compelling. Initial education's newly appreciated value derives mainly from its capacity to set the basic conditions for the psychological, sensory-motor and social development of children. Scientific evidence highlights the link between early sensory stimulation and the development of human intelligence, 50% of which is established by age four. Inadequate intellectual stimulation and affective care early in life, as well as early malnutrition, are likely to result in severe (sometimes irreversible) damage to the physical and emotional development of human beings. In this sense, primary education and even kindergarten can be too late an opporunity to develop these capabilities in children. IE can also modify inequalities rooted in poverty and discrimination, by giving children from disadvantaged backgrounds a fair stat. Early childhood education increases the return on primary and even secondary schooi investment, contributes to human capital formation, and raises participants' productivity and income levels. Research has confirmed that in the U.S., a US$1 investment in early childhood development can yield between US$4 and US$6 due to lower educationi and welfare expendiues and higher productivity among participants. 13. Rationale for Bank Involvement. Bank involvement in the non-formal EE program would fit in well with the Bank's strat of adjustment and poverty alleviation: First, it would render more efficient public sector imvestments. Through its effects on the schooi readiness of children, the IE program would contribute to inaeased retums on investments in primary education, thereby contributng to human capital formation. A 1987 Van Leer Foundation-financed evaluation of Mexico's non-formal IE program found that IE participants scored 8% and 13% higher on school readiness and academic skills tests, respectively, and were less likely to repeat the first grade (9% for IE participants vs. 27% for non-participants). Second, by helping target social investments to poor areas, the project would also increase the opporaunity for poor children to subsequently benefit from formal education and would contribute to a more equltable distribution of opporunities for welfare gains. 14. The proposed project is consistent with Bank education sector strategy for Mexico which emphasizes basic education as a means of human capital formulation and poverty alleviation. TE prepares children for timely entrance at school and improved performance in preschool and primary school. In this regard, the project would complement several Bank-financed projects that have supported the Gove ent's efforts to improve the efficiency of public resource allocation in the social sector and to alleviate poverty, such as the 1990 Basic Health Care Project (Loan 3272-ME), the 1990 Low I=come Housing Project (Loan 3140-ME), the 1991 Decentralization and Regional Development Project (Loan 3310-ME), and the 1991 Primary Education Project (Loan 3407-ME). All of these also focus on the same poorest states of Mexico. The proposed project would complement these projects with an expanded geographical coverage, and would prompt nationwide policy changes in IE. Additionally, the Bank is the only aid agency in Mexico involved in large-cale basic education programs, and would be able to transfer lessons learned from Bank experience with othr countries. The Goverment of Mexico has addressed etensively the child development needs of the organizet urban labor force with a good quality foral TE program, as mandated by the Constittion. However, the early childhood development needs of the poor rural populaton have been barely covered. The Bank's involvement in this proposed project would redress the imbalance in the  -4 - coverage and quality between formal and non-formal TE programs in Mexico and assist the Goverrtient to satisfy the need in the most efficient methods available at the moment. 15. Actions Agreed. During negotiations: (i) agreement has been reached with the Government, satisfactory to the Bank: (a) on a detailed project implementation schedule for the human resources training, educational materials, and institutieual strengthening components; () on terms of reference and a calendar for revision, updating, design, printing, and distribution of educational materials under the project; (c) that evidence will be provided at the annual review meetings that PCCs have been organized and community educators have been selected and trained in all of the communities identified for each year's work program in each of the project states; (d) on the organizational structure, functions, and staffing plans of central and state IE units; (e) that by February 28, 1993, revision, updating, or design of all printed materials, according to terms of reference agreed to during negotiations, will have been completed, satisfactory to the Bank; and by August 31, 1993, printing and distribution of these materials to meet proiect needs during the first three years will have been completed; (t) that monthly compensation of at least US$50 equivalent to community edurcators, and supervision travel allowances for module supervisors and zone coordinators of US$60 and US$50 equivalent, respectively, will enter into effect by June 30, 1993; (g) that a strategy proposal to ensure that community educators will be paid at least US$50 equivalent in real tenrs per month on a timely basis will be presented to the Bank by March 31, 1993; (h) that yearly independent quality control audits will be conducted; (i) on the criteria for the annual project implementation and mid-term reviews, all according to the project implementation schedule and the follow- up actions to be taken, satisfactory to the Bank; 0) that the Educational Management Information System will be in operation by December 31, 1993; (k) that staffing of the PCU will be satisfactory to the Bank; and (1) to conduct, joindy with the Bank, a mid-term review no later than October 31, 1995 and carry out subsequent action plans, satisfactory to the Bank, which will cover actions recommended by studies contracted pursuant to the project; and (ii) the Government has: (a) appointed the Director of the Prcject Coordination Unit; (b) submitted a short list of consultants proposed to design the Project Evaluatioi System, covering educational impact evaluation, process evaluation, and special studies in accordance with terms of reference agreed with the Bank; (c) submitted the proposed stucture and functions of the PCC, satisfactory to the Bank, at the local and state levels; (d) submitted revised job descriptions for module supervsors and zone coordinators, the proposed stucture of the PCCs and the Advisory Committee; and (e) submitted the structure of the Advisory Committee, indicating participating agencies and sectors, terms of reference, the calendar of meetings, and the official inception. 16. The conditions for loan effectiveness are for the Government to submit: (a) evidence that agreements have been signed with at least three of the ten project states for project implementation and use of loan funds; (b) evidence that key positions of IE units at the central level and in all of the ten sttes have been filled; and (c) an executed funds transfer agreement between the Borrower and the Guarantor. 17. As a condition for disbursement of project funds for each of the pro ect states the Government will submit evidence that an agreement has been signed with the respective state for project implementation and use of loan funds. 18. Environmental AsVects. The project would not have any adverse impact on the environment and is classified as C. The project will benefit the environment tough the basic health, environment, and sanitation education components in parent/children education and human resources training. 19. Proect Benefits. Project benefits would be reflected primarily in an enhanced quality of life, as well as of producivity, of children and participatng parents, who would acquire better child development skills. A total of about 1.2 million children would be betr prepared to benefit from primary and further education, and for a more productive labor force participation. Consequently, their earnings potential would be increased and economic growth would be promoted. In additon, since most of the parent and children in the program are from poor families, economic and social benefits (health, education, family planning, and earnings potential) would be more equally distributed, and a more cohesive society would be developed. The project would provide training opportunities to about 760 zone  -5- coordinators, 4,550 module supervisors, 45,500 community educators (mostly women) and 910,000 parents (especially mothers) in poor rural and urban marginal areas. The project model is expected to be adopted by other states, so the project impact would be nationwide. The institutional strengthening and policy- oriented components would enhance the productivity of human resources in the sector and develop the Government's capacity to evaluate, monitor and plan TE policies and programs. Furthermore, the project would contribute to the improvement of the quality and efficiency of public investments in education, especially in basic education, by reducing repetition and dropout rates and increasing primary education completion rates, and promote community development through weekly parents' meetings and PCMs. 20. Project Risks. The main risks associated with the project are: (J) the institutional weaknesses of SEP and SPES, and in particular their weak planning and managerial capacity to operate an expanded and upgraded program; (ii) Govemnment's austerity program which may make it difficult to provide sufficient funds for program operation; and (iii) difficulties in reaching and motivating parents in remote rural communities. The project would attempt to reduce these risks by: (i) strengthening the institutional capacity of the JE units of SEP and SPES, particularly in their planning, monitoring, and evaluation functions; (ii) improving incentives and working conditions for community educators, and implementing improved in-service training and closer supervision programs; (iii) providing loan resources to cover incremental operating costs on a declining basis and monitoring program buegets through annual and mid- term review meetings; and (iv) mobilizing local community support through PCCs, improved working conditions of community educators, supervisors, and coordinators, and multi-media promotional support. 21. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that e Executive Directors approve it. Lewis T. Preston President Attachments Washington, D.C. August 10, 1992  -6- Schedule A Page 1 of I MEXiCO INITIAL EDUCATION PROJECT ESTIMATED COSTS & FINANCING PLAN Estimated Project Costs!' Local Foreign Total -US$ million- PROJECT COMPONENT Human Resources Training 81.5 0.5 82.0 Educational Materials 7.0 5.8 12.8 Institutional Strengthening 7.3 0.7 8.0 BASE COST 95.8 Q 102.8 Physical Contingencies 0.6 0.2 0.8 Price Contingencies 10.8 0.6 11.4 TOTAL PROJECT COST 107.2 7.8 Financing Plan Local Foreign Total -US$ million- Government of Mexico 34.0 - 34.0 IBRD 72.2 7.8 80.0 UNDP/UNICEF/UNESCO 1.0 0.0 1.0 TOTAL FINANCING 1Q7.2 7.8 115.0 1 Excluding taxes, estimated at US$5.0 million.  7 - Schedule 1} Page 1 of 2 PROCUREMENT METHODS BY CATEGORY (in US$ million) PROCUREME Mi l CATEORY ITOTAL GOODS Equipment and furniture 0.7 0.5 -.- -.- 1.2 (0.6) (0.5) (I.- () (11) Vehicles . . , 0.7 0.7 Educational materials and library 5.7 5.4 2.5 IL -.- 13.6 books (5.7) (5.4) (2.5) (-.-) (13.6) CONSULTANTS Studies and technical assistance -.- . 1.4 bh 0.7 2.1 _ (. ) (-.-) ~~~~~~(1.4) (-) (1.4) MISCELLANEOUS Staff training and annual -.- -.- 29.2 L -.- 2).2 conferences (-.-) (-.-) (29.2) (-.) (29.2) Salaries and other operating costs -.- -.- 67.9 c/ 0.3 68.2 (34.7) (-.-) (34.7) TOTALS 6.4 5.9 101.0 1.7 115.0 (6.3) (5.9) (67.8) (0.0) (80.0) Notes: Figures in parentheses are the amounts estimated to be financed by the Bank NBF = Not Bank Financed i Local shopping obtaining quotes from at least three suppliers bI Consultants and other service contracts procured under procedures acceptable to the Bank cl Does not involve procurement  Schedule B Page 2 of 2 MEXICO INITIAL EDUCATION PROJECT DISBURSEMENTS WITHDRAWALS OF THE PROCEEDS OF THE LOAN Amount of the Category Loan Allocated % of Expenditures (expressed in to be financed US$ equivalent) Equipment & Furniture 1,100,000 100%X of foreign expendituf, 100% of lowal expenditures (ex-factory ost), and 90% of other locl expenditures Educational Materials & 13,600,000 90% of eligible expenditurese' Library Books Staff Training & Annual 27,100,000 100% of total costs Conferences Studies & Technical 1,400,000 100% of eligible expenditures/ Assistance Incremental Salaries & 30,800,000 100% unti an aggregate amount of US$8.6 Other Operational Costs milln is reuhed; 90% until an awezate anount of US$17.4 million is reachod; 75% until an aggregat amount of US$27.0 million has been reached; and 25% for the remainder Unallocated 6,000,000 Total 80,000,000