Mexico - Primary Education Project

Docxm The Worle !icpc ii. Nc. T PU9! M Typ FOR OMCLAL Ebp"tNkb P-5595-N4E MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$250.0 MILLION TO NACIONAL FINANCIERA, S.N.C. WITH THE GUARANTEE OF THE UNITED MEXICAN STATES FOR A PRIMARY EDUCATION PROJECT AUGUST 28, 1991 This document has a restricted distributio and may be uWd b recpients only in the performance of their official duties. Its contents may not otherwise be disclosed witout World Bank authorization.  CURRENCY EOUIVALENTS Currency Unit - Peso (MEX$) US$1.00 - 3,022 Pesos (July 1991) FISCAL YeR January 1 - December 31 ACADEMC YEAR September 1 - June 30 UNITS OF WEIGHTS AND MEASURES &etric British/US Ecuivalent 1 kilogram (kg) 2.20 pounds (lb) 1 metric ton (m ton) m 2,250 pounds 1 liter (1) - 0.26 gallons (gal) 1 cubic meter fi3) - 1,000 liters ACRONYMS DOPPYP General Directorate of Planning, Programming and Budgeting in SEP (Direcci6n General de Planeacion, Programaci6n y Presupuesto) GDP Gross Domestic Product NAFIN National Finaneing Company (Nacional Financiera, S.N.C.) PCU Project Coordinating Unit SCEP SEP's state-level education entities (Servicios Coordinados de Educacin Ptblica) SEP Secretariat of Education (Secretaria de Educaci6n Publica) SPCU State Project Coordinating Unit  FOR OMCIAL US ONLY tEXICO PRIMARS EDUCATION PROJECT LOAN AD UPROJECT SUMMARY ornrowers Nacional Financiera, S.N.C. (NAPIN) GuSrantor: United Mexican States 3eneficiari.s: Secretariat of Education (Secretaria de Educaci6n Ptblica, SEP) and SEP's State Level Education Entities (SCEPs) in the states of Oaxaca, Chiapas, Guerrero and Hidalgo.11 Mount: US$250.0 million equivalent TIerm:s Repayment in 17 years, including five years of grace at the standard variable interest rate. Finangina Plan: Local o1.eatn letal Federal Governrent 102.0 - 102.0 a/ IBRD 205.6 44.4 250.0 Total 307.6 44.4 352.0 a/ at Includes taxes and duties (estimated at US$39 million). &eonomlc Rat,e of Returne Not applicable Staff Appraisal: Report No. 9770-ME; dated August 28, 1991 Maps: IBRD No. 23053 1/ These State Level Education Entities (Servicios Coordinados de Educacifn Pdblica) are delegations from SEP to the states. This document has a restricted distibution and may be used by ecipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Wu.4H Bank authorkation.  MEMORADUM Alll) RECOFlDlTIOI 0T PRESIDENT 0 THE IBID TO TDE ECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANCIEA, S.N.C. WITH TUE GUARANM 0 TlHE UNITED MEICAN 8TTZES FOR A PRIMARY EDUCATION PROJECT 1. The following morandum and recommndation on a proposed loan to Nacional Pinanciera, S.N.C. (lAPIN) for US$250.0 million equivalent is submitted for your approval. The proposed loan, which would be guaranteed by the Unitcd Mexican States, would be repayable over 17 years, including five years of grace, at the Bank's variable interest rate. NAMN ould be the Borrower and the Secretariat of Education (Secretaria de Educact6n Publica, SEP) and SEP's State Level Education Entities (SCRPs) would be the executing agencies. 2. Batkgrggd. After nearly a decade of deep recession, Mexico's successful economic reform end restructuritg program has placed the country back on a growth track. Nowever Mexico's potential for sustained growth is still constrained by relatively low levels of human capital formation. Although considerable progress ws" achieved between 1950 and 1980 in expanding the education system, the 1984 Income-Expenditure survey shows that 201 of the population has no education and another 551 has at most six years of schooling. There also exist striking and persistent differences in terms of the level of education among regions and income groups, strongly correlated with differences in the incidence of poverty; average schooling rAnges from 3-4 years in the south to 7-9 In Mexico City and the north. 3. The two issues of low educational levels and unequal distribution of educational opportunities can be directly related to critlcal deficiencies in the provision of basic education services, in particular at the primary level. While enrollment ratios are high (982 at the national level), the quality and internal efficiency of the primary school system are low, characterized by high repetition and dropout rates and low cognitive achievement. This problem--fsr more acute in the poorest states--can be linked to: (i) deficiencies In teacher training; (ii) lack of educational materials; (iii) teacher absenteeism and misallocation; (iv) weak evaluation and supervision; and (v) inadequate physical facilities and difficulty of access in remote areas. This situatLan has worsened considerably since 1982, when the drastic decline in public educational expenditures began. Spending cuts have been more severe than in other Latin American countries enacting fiscal austerity measures (total public education spending fell from 5.01 of GDP In 1982 to 3.21 in 1988) and have affected primary education most of all. The current level of spending per primary student Is far below the level in other Latin American countries with similar per capita lncomes. 4. In 1989, Government education policy changes were announced in the lEducation Modernization Program 1989-94," which sets as its major objectives: C1) increases in the level of education among the population; and (ii) improvements in overall educational quality, with basic education identified as the foremost priority. More specifically, first, the Government Introduced this year a new curriculum vhich has been revised with the objective of providing itcreased continuity between the three levels of education and second, it proposed to complement this action with: (i) programs targeted at reducing repetition and dropout rates; (1i) classroom rehabilitation and construction; (i11) a reorganized teacher training system; (iv) improved supervision and evaluationg (v) continued, but gradual, decentralization; and (vi) lncreased community participation. Viewed in Its entirety, the program is well-targeted, ambitious and designed to improve the efficiency and equity of the education sector.  - 2 - S. ationsa for- Bnk Group g nvoovement. The proposed project is an integral part of the Bank's assistance strategy for Mexico, supporting growth recovery and poverty alleviation. By assisting the Mexican Government in Improving both the efficincy of educational expenditures and the quality of services, the project will help remove human resources constraints on growth. By focusing on primary education and on four of the most disadvantaged otates (see para. 6), it will also, together with the Bank's Low Income Housing, Basic Health Care and Decentralization snd Regional Development projects, address the needs of the poor and thus contribute to a more equitable distribution of educational opportunities. This effort would also be supplementee' by the proposed Initial Education Project (under preparation) which would emphasize early childhood development as an effective means to improve children's readiness for learning. Currently, the Bank ti the only International financial aid agency working for primary education in the poorest states. 6. Proiegt Objectives. The proposed project vould iWprove the quality and efficiency of primary education, focusing on four (Oaxaca, Guerrero, Chiapas and Nidalgo) Mexican states with the highest incidence of poverty and low educatlon indicators. These objectives would be achieved through: (i) reducing the high repetition and dropout ratest (Ui) raising the level of cognitive achievement of childrens and (iiI) strengthening management of the primary education system, Including program design, implementation, monitoring and evaluation. 7. Proiect Descrl2timn. The project consists of two major components: (a) the Educatlonal Services Improvement Component (72 percent of the total project cost including contingencies) would: (i) provide educational materials, books for school libraries and some bilingual reading books in primary schools, mostly rural; (ii) upgrad skills of underqualified teachers and provide in-service training for prlmry school teachers and teacher trainers, using traditional methods as well as distance education technologies; and (III) rehabilitate, replace and construct efucational facilities; and (b) the Institutional StreuLthnlnas Coggonent (28 percent of total project cost) would: (i) provide work incentives for teachers; (li) improve the supervision system; (I11) strengthen the organization of the support service delivery system and the management capacity of the SEP at the federal and state levels; (iv) support improvements in the information, monitoring and evaluation systems; and (v) conduct celected studies to assess the impact of project activities and help refine future program design. The project implementation would be carried out b7 the SP at the central level and by the SEP delegation. at the state level (SCEPs), which are key institutions reaponsible for the actual delivery, operation and management of educational services. 8. The total project cost is estimated at US$352.0 million equivalent, including taxes and duties (estimated at US$39 million), with a foreign exchange component of US$44.4 million equivalent (12.5 percent). 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$6.0 million equivalent would be granted for oependitures incurred after March 22, 1991. 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 Appraisal Report go. 9770-ME, dated August 28, 1991, is being distributed separately. 9. Zm.ggem2gatlon ArrkgnRments. The borrower would be WAIN, which would act as the administrator of the loan. The proceods of the loan vould be disbursed  -3- during a six year period. The project would be Implemented through the existing orgsni.ational structure of the SP, sand implementation responsibilities would be Phar.d between the central level and SEP's state delegations. Overa'? authority jor project magnement would be vested In SEP's Underescretariat for Educational Coordination. The Undersecretary would be assisted in the general management of the project by a Project Coordinating Unit (PCU) directly associated with the General Directorate for Planning, Programming and Budgeting (DGPPYP) at the central levol and by State PCUs (SPCUs) placed under the Director of that state's SCEP. 10. Issues "ad Actions. During nuogtlgaE agreements were reached on the following main issues: (a) mchan_ism to uonitor teacher attendance at training sessions and distribute corresponding incentives; (b) a detailed description of the teacher training courses and training materials, would be submitted to the sank by June 30, 1992 for review; (c) the detailed description of all distance education (audiovisual) programs would be presented to the Bank by April 30, 1992 for approval; (d) SEP would monitor and present during annual reviews the entire civil works program carried out by SEP and by the Solidaridad Program; (a) evidence regarding donation or purchase of land for new construction and adequate staffing would be provided during the annual work plan reviews; (f) the technical plans for the remaining two thirds of school rehabilitation works planned for the first year of the project would be submitted during the rest of 1991, and plans for subsequent years during annual reviews; (g) the list of target schools selected for the first year under the teacher incentive program, with subsequent year school selection to be agreed with the Bank during annual reviews; (h) terms of reference, implementation schedules, short list of consultants, collaboration of foreign consultants, and model consultant contracts for the studies on project impact evaluation and cost-effectiveness, bilingual books, teacher incentives, the TV pilot program, and the project's impact on chil6iren's behavior, end availability of data collected to the Baok; (i) staffing plan for the PCU and the SPCUs, appointment of the PCU operating director, and several key staff of PCU and SPCUs; the Government would finalize appointment, by the date of Loan effectiveness, of all operating directors of the SPCUs, all other staff, and appoint staff for the technical committee associated with the PCU; (j) performance indicators and project progress review criteria regarding project monitoring and evaluation to be used for annual and mid-term reviews; (k) undertaking of annual reviews by the G