Argentina - Second Social Protection Project (TRABAJAR program)

Document of The World Bank Report No. 16507-AR PROJ1ECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$200 MILLION TO THE ARGENTINE REPUBLIC FOR A SECOND SOCILAL PROTECTION PROJECT (TRABAJAR PROGRAM) June 2, 1997 Human and Social Development Group Country Department I Latin America and the Caribbean Region  CURRENCY EQUIVALENTS Currency Unit = Argentine Peso (Arg$) Arg$1 = US$1 FISCAL YEAR January I to December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy FONAVI National Housing Fund FOPAR Fondo Participativo de Inversion Social/Participatory Social Investment Fund GDP Gross Domestic Product ICB International Competitive Bidding MTSS Ministerio de Trabajo y Seguridad Social/Ministry of Labor and Social Security NCB National Competitive Bidding NGO Non-governmental Organization SOE Statement of Expenditure TOR Terms of Reference Vice President S.J. Burki Director G.T. Nankani Ctry. Sector Leader A. Colliou Task Manager P. Jones  Argentina Second Social Protection Project Table of Contents Project Financing Data Block 1: Project Description 1. Project development objectives ....................................................................2 2. Project Components ....................................................................2 3. Benefits and Target Population ....................................................................2 4. Institutional and implementation arrangements ......................................................2 Block 2: Project Rationale 5. CAS objectives supported by the project .................................................................4 6. Main sector issues and Government strategy ..........................................................4 7. Sector issues to be Addressed by the project and strategic choices ........................5 8. Project alternatives considered and reasons for rejection .......................................6 9. Major related projects financed by the Bank and/or other development agencies.. 6 10. Lessons learned and reflected in the project design ...............................................7 11. Indications of Borrower commitment and ownership ............................................7 12. Value added of Bank support ....................................................................7 Block 3: Summary Project Assessments 13. Economic Assessment ....................................................................8 14. Financial Assessment ....................................................................8 15. Technical Assessment ....................................................................8 16. Institutional Assessment ....................................................................8 17. Social Assessment ....................................................................9 18. Environmental Assessment ....................................................................9 19. Participatory Approach ................................................................... 10 20. Sustainability ................................................................... 10 21. Critical Risks ................................................................... 11 22. Possible Controversial Aspects ................................................................... 11 Block 4: Main Loan Conditions 23. Effectiveness Conditions ................................................................... 12 24. Other ................................................................... 12 Block 5: Compliance with Bank Policies ................................................................... 12 List of Annexes Annex 1: Project Design Summary ........................................................... 13 Annex 2: Detailed Project Description ........................................................... 15 Annex 3: Estimated Project Costs ........................................................... 17 Annex 4: Project Monitoring Indicators ........................................................... 18 Annex 5: Procurement and Disbursement Arrangements ......................................... 21 Annex 6: Project Processing Budget and Schedule .................................................. 26 Annex 7: Documents in the Project File ........................................................... 27 Annex 8: Statement of Loans and Credits ........................................................... 28 Annex 9: Argentina at a Glance ........................................................... 36   Project Appraisal Document Page I Argentina Second Social Protection Project INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Latin America and the Caribbean Regional Office Country Department 1 Project Appraisal Document Argentina Second Social Protection Project (TRABAJAR) Date: May 27, 1997 Draft x Final Task Manager: Polly Jones Country Manager: Gobind T. Nankani Project ID: 49268 Sector: Social Lending Instrument: Investment Loan PTI: x Yes g No Project Financing Data X Loan E Credit g Guarantee Q Other [Specify] For Loans/Credits/Others: Amount (US$m/SDRm): $200 ...................................................................................................... ................................................................................................................................................. Proposed Terms: g Multicurrency X Single currency Grace period (years): 5 Standard 2 Fixed X LIBOR-based Variable Years to maturity: 15 Commitment fee: .075% Service charge: 0% n n in..g................................................................................................................................................................................................................................ Financing Plan (US$m): Source Local Foreign Total Government (inc. national, 622 178 800 prov. and municipal levels) Cofinanciers' 100 100 IBRD/IDA 198 2 200 Other (Private) 100 100 ........................................................................................................................................................................................................................... Borrower: Argentine Republic Responsible agency(ies): Ministry of Labor and Social Security Estimated disbursements (Bank 1998 1999 FY/US$M): Annual 100 100 Cumulative 100 200 Expected effectiveness date: July 31, 1997 Closing date: June 30, 1999 1To be confirmed (IDB).  Project Appraisal Document Page 2 Argentina Second Social Protection Project Block 1: Project Description 1. Project development objectives (see Annex 1 for key performance indicators): The project would reduce poverty by providing temporary income support to poor, unemployed workers hired in the TRABAJAR public works program. The project builds on the experience of the first Social Protection Project, which safeguarded critical social programs during 1995-96 and provided income support to the poor unemployed, including through the first phase of TRABAJAR. The first Social Protection project also supports improvements in the management and effectiveness of social programs (including TRABAJAR) through work on poverty analysis and program evaluation and finances a pilot participatory Social Investment Fund. Project execution has gone well -- slightly over 80 percent of the funds have been disbursed as of the end of May 1997, in line with appraisal estimates. Most of the remaining funds are allocated for the social investment fund, whose implementation was expected to take longer. The first Social Protection Project was successful in maintaining the level of spending on critical social programs during 1995-96 and evaluations of several social programs have been completed. ................I ............................................. ..... ................................................................................. 2.Poetcomponents Component Category Cost Incl. Contingencies % of Total (US$M) TRABAJAR Subprojects: 1178 98 Subprojects are proposed mainly by municipalities and private organizations and evaluated according to specified criteria. These projects are small, quickly implemented, labor- intensive investments in the areas of economic and social infrastructure. The program encourages projects that are located in poor communities. Under the program the sponsoring agency funds the cost of materials and any skilled labor, and TRABAJAR finances the wages of unskilled labor up to a maximum of $200/mo. Project Administration: 22 2 Management of the program by the Ministry of Labor and Social Security. Total 12001 100 . .... i ............................................................ ............................................................................... ....... .......................................................................................... 3. Benefits and target population: The project would provide temporary financial assistance to poor workers, who are suffering from high levels of unemployment, and would assist in improving social and economic infrastructure in poor communitie!,xThe number of people that would participate in the program as workers is estimated at 350,000. These workers would receive a maximum of $200/mo while they are working on a project. About 16,000 projects are 1Includes US$100 million of IDB co-financing which is still to be confirmed.  Project Appraisal Document Page 3 Argentina Second Social Protection Project expected to be completed, of which a large share would be located in poor communities. 4. Institutional and implementation arrangements:(See Annex 2 for a detailed description). The TRABAJAR program is managed by the Ministry of Labor and Social Security staff at the national, regional and provincial levels. The Ministry will provide the sub-project menu, criteria and other instructions for sub-project preparation, evaluation, approval, and supervision. It will assign the resources for each province using a formula which weighs most heavily the distribution of the poor unemployed, and will also consider implementation performance. Sub-projects can be proposed by municipalities, provinces, national agencies or private organizations. Up until now the major source of sub-projects has been municipalities. Since the Government is significantly expanding the program, the Ministry of Labor intends to increase promotion and training activities. All sub-projects will be evaluated by professionals according to a methodology which was developed during project preparation, drawing primarily on the experience of social funds. The methodology incorporates economic, technical, financial, institutional, environmental, and social aspects. As projects are evaluated, a data base on prices of materials as well as unit costs will be built up in order to be used as a basis for comparison for subsequent project proposals. The database would include standard designs as well which could be made available, as necessary, to assist some agencies in project preparation. For about 30 percent of the sub-projects, evaluation will include a site visit. The sub-projects which receive a positive evaluation will be considered at monthly meetings by committees constituted at the regional level, which include Provincial Managers of Employment and Training (MTSS employees), the Regional Manager of MTSS, a representative from the national office of the MTSS, and members of civil society as observers (currently mostly business and union representatives). Sub-projects will be ranked by a point system according to several criteria, the most important of which is the poverty level of the area in which the sub-project is located. Sub-projects will be approved up to the limit set by the available funds. Payments to workers will be made by checks through the National Social Security Administration. Sub-projects will be supervised by trained professionals generally three times during implementation. A methodology for supervision of sub-projects was developed during project preparation. Implementation period: 18 months Executing agencies: Ministry of Labor and Social Security (MTSS), local governments, and private organizations Project coordination: Ministry of Labor and Social Security Project oversight: N/A Accounting, financial reporting and auditing arrangements: The records and accounts of the Ministry of Labor relating to the national program (essentially labor payments made by the National Social Security Administration) would be audited each year by independent and qualified auditors, with a separate opinion provided for SOEs, using generally accepted auditing standards and procedures. These records have been audited under the ongoing Social Protection Project and have been found to be acceptable. Monitoring and evaluation arrangements: The program's management information system is being strengthened in order to be able to provide timely monitoring reports covering all stages of the project cycle. A set of monitoring indicators has been agreed. An evaluation of the direct benefits provided by the project will be undertaken by applying to a random sample of workers benefiting from the project a survey instrument whose results can be compared with a control group selected from the population at large. The indirect benefits of the projects financed by TRABAJAR will be measured by ex-post evaluations of a random sample of projects. In cases in which the outcome of a project is not satisfactory, there would be an examination of the processes of both the TRABAJAR program and the executing agency to determine the main cause and to draw lessons for the future. The evaluation studies will be financed mainly under the ongoing first Social Protection Project. A mid-term review will be held for the project no later than March 15, 1998.  Project Appraisal Document Page 4 Argentina Second Social Protection Project Block 2: Project Rationale 5. CAS objective(s) supported by the Document number and date of latest CAS discussion: The document Country project Assistance Strategy for the Argentine Republic, Report No. 16505-AR, was discussed by the Board on May 15, 1997. The project supports the CAS objective in the area of enhancing social development, including poverty alleviation and strengthening the social safety net during the continuing restructuring of the economy. The increase in poverty in 1995- 1996 was closely related to the growth of unemployment in Argentina. Recent data show that about 40 percent of those in the poorest decile were unemployed, compared to an average unemployment rate for the population as a whole of 17 percent. ............................................................................................................................................................................................................................ .............. ............ ...... 6. Main sector issues and Government strategy: The main issues can be categorized under four headings: poverty alleviation, labor market, employment program policies, and social expenditures. Poverty alleviation. Argentina's urban poverty declined between 1990 and 1994 together with the achievement of economic stability and growth. This was a dramatic reversal of the poverty trend during the latter part of the 1980s. However, economic stability and growth are necessary but not sufficient conditions to ensure continued and sustainable poverty reduction. In particular, so far outcomes in the area of employment creation have been unsatisfactory and, as a result, some of the previous gains in poverty reduction were reversed in 1995-96, particularly during the economic recession. Development of a policy environment which would promote higher levels ofjob creation is crucial for poverty alleviation in Argentina. Labor market. Argentina's options in dealing with widespread unemployment are to rely on economic growth to create employment and/or to institute labor reforms that encourage greater and more productive use of labor. A recent Bank sector report, Estimating the Benefits of Labor Reform in Argentina (Report No. 15643-AR, January 31, 1997), argues that given the scale of the unemployment problem, the limited macroeconomic instruments at the disposal of the government, and the adverse short-term fiscal effects of further reductions in payroll tax rates, further labor market reforms were needed. While the resumption of sustained growth will improve the employment outlook, it will do so only over the longer term. Empirical analysis indicated that in fact the output elasticity of employment for Argentina was lower than the wage elasticity of labor demand. The report suggested the following major reforms: (1) removing the legally granted monopoly power over negotiations in the hands of sector unions and decentralizing collective bargaining to the firm level; (2) further reductions in payroll taxes (difficult in the short-run because of fiscal austerity); and (3) replacement of mandated severance payments by a fully funded severance payment system. With the aim of increasing the capacity for job creation in the economy, the Argentine authorities have taken some steps to lower labor costs, which are high by international standards. They have reduced payroll taxes, increased the flexibility of contracts, and modernized employment regulations. However, so far the Government has not been able to make progress in the critical (but politically very difficult) area of decentralization of collective bargaining and reform of the severance payment regime. In late 1996, the President signed three emergency decrees which decentralized collective bargaining for small and medium-sized companies. The Government also presented legislation to the Congress which would make it easier for firms to lay off workers, including the establishment of a fully funded severance payment system. However, key aspects of the decrees have been declared unconstitutional by intermediate-level courts, and the severance payments legislation has not received sufficient support in the Congress. In February the Government decided to carry out a tripartite negotiation on labor reform with union and business representatives. So far these negotiations have not been successful in reaching an agreement among the three parties. Employment program policies. In the past, many employment programs in Argentina have been characterized by high administrative costs, poor targeting and a high level of fraud. Recently, the government has introduced changes in various employment programs to make their management and administration more efficient and transparent. The government also identified the need to reduce the administrative cost of programs, target them to the poor, and improve the mechanisms for evaluation and supervision. Another goal is to give priority to those programs with the greatest social impact, and improve their implementation. The design and operation of the TRABAJAR program reflect these  Project Appraisal Document Page s Argentina Second Social Protection Project reforms. Social expenditures. After increasing steadily during the first half of the decade, consolidated public social expenditures are expected to fall slightly in 1997 to about $52 billion or 16.5 percent of GDP. The projected reduction in spending is explained largely by lower outlays on social security and health/medical attention and obras sociales (health insurance for formal sector workers). The national government finances about 60 percent of consolidated social spending. Social insurance outlays account for two-thirds ($19 billion), and spending on health and education for an additional $6 billion. Health spending is mostly accounted for by medical insurance for the elderly and the obras sociales, and, in the case of education, by transfers to tertiary education. Of the remaining $4 billion, the largest components are nearly $1 billion for FONAVI, resources passed to the provinces for housing which is part of the tax co-participation agreement between the federal and provincial governments, and a similar amount in the Fondo del Conurbano (financing for the province of Buenos Aires). About $2 billion is accounted for by about 40 programs covering the major areas of labor, compensatory education programs, services for the elderly, community services and nutrition. About $400 million of that goes for unemployment insurance. A high share of national social spending cannot be reallocated easily in the short run. The same is true for FONAVI, which is in effect a series of provincial housing programs for which the national government is only a financial agent. The main area for efficiency gains appears to lie in a relatively small amount of spending - $2 billion of "targeted" programs. The Government recognizes that there is a problem of fragmentation and overlapping of programs and that administrative costs in some cases are probably excessive. Some actions to address these issues have been taken. A Social Cabinet has been organized under the Chief of the Cabinet with the aim of improving coordination among social programs. Evaluations of several programs are in process and others are planned in the short term (several supported by the World Bank). .... .................................................................................................................................................................................................................................................. 7. Sector issues to be addressed by the project and strategic choices: Poverty Alleviation. The project will help to alleviate poverty by providing short-term employment to poor workers. The targeting mechanism is the low wage rate, which is expected to be attractive only to those with few prospects for employment. The strategy is justified by the strong relationship in Argentina between unemployment and poverty status. The project will promote poverty alleviation also through an allocation of resources which will favor areas with a higher proportion of poor unemployed individuals. The project ranking criteria also favor projects located in poor areas and those paying lower salaries to workers. Labor Market. The project is designed to be a social safety net for the poor and is not linked to additional labor market reform. The project does not provide a long-term solution to the currently low employment generation capacity of the Argentine economy, which will probably require a resumption both of growth and of labor market reform. Employment Program Policies. The sector issue to be addressed by the project relates to improvements in the design of the program to increase its cost-effectiveness in poverty alleviation. This includes several aspects. First, the wage rate has to be set so as to promote self-targeting by the poor and to minimize displaced income. The economic analysis of the project indicates that the wage rate proposed is appropriate. Related to this objective, other criteria for participation in the program have been eliminated (head of household, for example). Second, both the evaluation and the supervision of projects would be strengthened, drawing on lessons from social funds, with a view to ensuring that the projects financed by the program are of reasonable quality. Third, allocation of resources geographically will improve the targeting to poorer areas. Fourth, project ranking criteria will improve poverty targeting as well as cost-effectiveness of the program by giving more weight to the location of projects in poor areas and by "rewarding" projects with higher labor intensity, among others. Fifth, the project menu has been modified to exclude productive activities which generate mostly private benefits. Low-cost housing is still on the menu, but receives the lowest ranking among project categories. Social Expenditures. This project does not address issues related to social expenditures and their efficiency because work in this area is covered by other projects. The Bank is supporting evaluation and analysis of social expenditures in Argentina in several other projects, including the first Social Protection Project, and is supporting via other projects ...........................................................................................................................................................................................................................  Project Appraisal Document Page 6 Argentina Second Social Protection Project major reforms in programs which account for a large share of public social spending (for example, reforms in pensions, health insurance, and higher education). The Bank would continue to support the Government's efforts to improve the efficiency of national social spending by supporting program evaluations and other analysis of social spending in the context of the first Social Protection Loan. 8. Pojet ateraties onsderd ad reasons for rejection: One alternative project design option would have been a social fund managed outside of traditional government channels and using private contractors. Our review indicated that the MTSS-managed TRABAJAR program included sufficient transparency, objective project selection and targeting criteria, and controls. The fact that the government manages the program makes it easier to ensure that the wage rate offered will encourage self-targeting by the poor. Why isn't the Bank supporting another type of safety net - for example, nutritional assistance to children? One reason is that the Bank is supporting priority social programs in other loans - Maternal and Child Health I and II and the first Social Protection Project. The focus on employment creation is justified because most of the increase in unemployment has been felt by the lower income groups in Argentina. The link between poverty and unemployment is strong. 9. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Latest Form 590 Ratings (Bank-financed projects only) World Bank Ongoing IP DO Social Protection Project (Ln. 3957-AR) HS S Maternal Child Health and Nutrition ( Ln.3643-AR) S S Health Insurance Reform (Ln. 4002/3-AR) HS HS Health Insurance Technical Assistance HS (Ln. 4004-AR) Second Municipal Development HS S Project (Ln. 3860-AR) Provincial Reform Project (Ln. 3877-AR) HS HS Maternal and Child Health II (Ln. 4164-AR) N/A N/A Planned Second Provincial Reform Project Inter-American Development Bank Ongoing Municipal Development Project Youth Training Program Planned National Employment Program . i ........ ....................................................................................................... ...................................................................................................................I............... 10. Lessons learned and reflected in the project design: The lessons learned and reflected in the project design relate to public works schemes and the operational procedures of social funds. The most important general conclusions which can be drawn from the experience with public works schemes are as follows. One, the level of the wage rate is critical in determining the distribution of benefits from the program, as well as how much of the program is targeted toward the poor. Maintaining the program wage at the level of the ruling market wage for unskilled labor is the best way to improve the transfer of the program's benefits to the poor. Two, public works schemes are most appropriate in situations in which poverty is expected to be transient. They are not long-term solutions. Three, the program can be designed to encourage greater participation of women, lower transactions costs for the poor as well as the potential cost of foregone income, and greater involvement of non- governmental organizations and grass roots participation to prevent abuse. Four, an important determinant of the cost- effectiveness of the program is the share of wages in the cost of subprojects. Five, it is important that the program be designed to strengthen the secondary benefits from the assets created. Effective monitoring and supervision of projects is important to ensure the quality of works. Relevant lessons learned from Bank experience with social investment funds are now relatively abundant. Major lessons,  Project Appraisal Document Page 7 Argentina Second Social Protection Project which are reflected in the design of the project, include: (a) complementarity of social fund subprojects with other investments in the social sectors; (b) the desirability of financing small, technologically simple projects with substantial community involvement; (c) the need for transparency; (d) the importance of using some monitorable form of poverty targeting; (e) the involvement of both decentralized agencies and NGOs/grassroots organizations in subproject implementation; and (f) the inclusion of strong supervision mechanisms. 11. Indications of borrower commitment and ownership: The borrower's commitment to the TRABAJAR program has been demonstrated by its funding of TRABAJAR during 1996, including a budget increase, and by the stress given in the design and operation of the program to the use of objective allocation and approval criteria and to monitoring and supervision of the projects financed. f i W a W .. i i ..... ....................................................................................................................................................................................................................... 12. Value added of Bank support: Bank support adds value in several areas. Our review of TRABAJAR identified modifications in the design of the scheme which would increase the efficiency of the program in making transfers to the poor. The experience of the Bank in the targeting of social programs has been applied. The knowledge gained by the Bank in social fund projects was used to improve the operating procedures of the program. Finally, Bank experience will help in the evaluation of the program.  Project Appraisal Document Page 8 Argentina Second Social Protection Project Block 3: Summary Project Assessments (Detailed assessments are in the project file. See Annex 8) 13. Economic X Cost Assessment: Effective ness Analysis: The TRABAJAR program can be thought of as generating direct benefits (net income gain to poor workers) and indirect benefits (mainly the value of assets to communities). The proportion of total public expenditure on TRABAJAR (by both the MTSS and cofinancing by local government) which is accountable to the net income gain to poor workers is determined by the following four variables: (a) the budget leverage, or the amount of private financing mobilized by the project; (b) the labor intensity (or the share of the cost of unskilled labor in the total project cost); (c) the targeting performance; and (d) the proportionate net wage gain to poor participants. From the information available, it is estimated that the cost of transferring $1 to poor workers through the TRABAJAR scheme in 1996 was in the range of $3-5, though probably closer to $5. By a combination of changes in program design and in the ranking criteria for projects, which among other objectives, would promote a somewhat higher labor share and minimize the foregone incomes of participants, it should be possible to bring the cost of transferring $1 to the poor under TRABAJAR down to $3-4 during the proposed project. Nevertheless, these calculations suggest that the case for TRABAJAR as an anti- poverty scheme rests heavily as well on establishing that the indirect benefits are of sufficient value to poor people to outweigh the extra costs that are incurred with this type of program. Several features of the existing scheme suggest that the indirect benefits, particularly from the assets created, help tilt the balance in favor of TRABAJAR over alternative transfer-based schemes. These features include: well-defined project selection criteria and approval procedures; co- financing of non-labor project costs by local governments; and the existence of considerable administrative controls and monitoring. This was confirmed in site visits during project preparation. An ex-post evaluation of a sample of projects financed by TRABAJAR during 1996 was undertaken during project preparation. The study identified some weaknesses, but in general found that project quality was acceptable. Planned improvements in the evaluation and supervision of sub-projects are aimed at ensuring reasonable value to communities. Some of the changes in procedures address the weaknesses identified in the evaluation study. .......................................................................................................I......................... ............................................................................................................... 14. Financial Assessment: (N/A) NPV=US$ million; FRR= % The evaluation methodology for sub-projects includes, as appropriate, a financial analysis for some types of subprojects. ............................................................................................................................................................................................................................................................ 15. Technical Assessment: All projects will be evaluated before being submitted for approval. The evaluation methodology (See Annex 2) includes technical aspects, focusing in particular on appropriate dimensioning of the project, comparison with a data base on unit costs, and a check for compliance with existing national and local standards whenever available. An ex-post evaluation of a sample of projects financed under the TRABAJAR program during 1996 was carried out. The findings were that in general project quality was reasonable. The major weakness identified was the fact that a few projects financed under the program were unable to complete construction with the funding provided. Safeguards against this problem are included in the evaluation methodology. .........................................................................................................................................................I................................................................................................... 16. Institutional Assessment: a. Executing agencies: The program is directed by a team within the Directorate of Employment and Training Policies in the Ministry of Labor and Social Security. Day-to- day management is handled by the provincial Offices of Employment and Training. It is expected that the staff at both levels will be supplemented by consultants to strengthen the procedures relating to the evaluation and supervision of sub-projects. Payments to workers are made through the National Social Security Agency. The objective of quadrupling the size of the program is very ambitious, and is driven by the desire of the government to have a substantial impact on the difficult condition of those lacking work among lower-income groups. Several factors would facilitate the expansion, including the experience gained in the first year of operation, improvements being made in evaluation and supervision procedures, a reduction in the time to process payment documentation, and a strengthening of the information system. The demand for financing for sub-projects particularly from municipalities has been high. More focus will be given to promotion activities (including training in the presentation of projects) in order to expand the number and type of executing agencies. Resources will be allocated to each province based primarily on the relative distribution of the target population (poor unemployed workers). However, this allocation would be provisional in order to be able also to take into account performance in implementing  Project Appraisal Document Page 9 Argentina Second Social Protection Project the program, and to reallocate resources among provinces as necessary. In any event, a somewhat slower rate of disbursement on the project would not significantly reduce the expected benefits of the project. b. Project management: The project will be managed by a small unit within the Directorate of Employment and Training Policies in the Ministry of Labor and Social Security. The record of project management during the first year of implementation was good. One positive feature was their ability to use their monitoring data to identify problems and their record in resolving problems and improving implementation. Performance during the accelerated project preparation process has been excellent. An operational manual has been prepared by the MTSS and approved by the Bank. .. .................................................................................................................................................................................................................................................. 17. Social Assessment: Community Participation. A social assessment was carried out for this project. The local consultant who completed the social assessment worked with the project team in the Ministry of Labor. The social assessment evaluated the role of NGOs and the community in the existing program and identified areas in which their role should be strengthened and the appropriate mechanisms to be integrated in the various stages of the project cycle - promotion, selection of sub- projects, execution, supervision, and operation. During 1996, non-profit groups (mostly community groups) were the main sponsoring agency for about 15 percent of projects. This ratio compares favorably with the experience of other social funds in Latin America. For other projects non-profit groups participated, but had secondary responsibility. The main recommendations of the social assessment which were incorporated into the design of the expanded project are: more project promotion, more technical assistance in project preparation, removal of bias for high shares of project co- financing and access to outside institutions for evaluation of projects. In addition, a social evaluation is part of the evaluation methodology for projects. In the project application, sponsoring agencies are asked to describe how communities have been involved in project selection and their role in project implementation and supervision. Gender. Labor force participation by females has risen in recent years, and stands now at around 30 percent. The participation rate for males is 53 percent. Women account for slightly less than half of the total unemployed. About a fifth of poor households are headed by a woman. Unemployed men are more likely to belong to poor households than are unemployed women. About 55 percent of unemployed men are in households in the bottom 20 percent of the income distribution (as measured by household income per capita) while the share for unemployed women is 40 percent. During 1996 about 15 percent of the workers on the TRABAJAR program were women. We expect that this percentage will increase in the expanded program. In the previous program workers who were heads of household were given preference. In the new program no such preference will be given. The gender characteristics of workers on the program will continue to be monitored. In addition, the Ministry of Labor will continue to fund from its own resources a complementary program of Community Services which specifically targets poor women. This program funds service activities and pays the same amount to workers as the TRABAJAR program. During last year, considering both TRABAJAR and the Community Services program, the participation of women in the public employment programs of the Ministry of Labor was about 25 percent of total beneficiaries. ....................................................................................................................................................................................................................... Environmental Category f A X B n C 18. Environmental Assessment: The project has been assigned a B category. The subprojects to be financed under the Loan are expected to be small (average size during 1996 was US$70,000) and most of the environmental impacts should be able to be predicted and subsequently avoided or mitigated with common practices. Consideration of environmental aspects has been incorporated into the evaluation methodology. The description of the methodology together with forms, etc. is included in both the Operational Manual and in the Guide for Presentation of Projects. Environmental considerations are also incorporated into promotion and supervision activities. The counterpart team with Bank assistance developed the environmental checklists, etc., using as models best practices from other social funds as well as the Municipal Development and FOPAR projects in Argentina. The evaluation methodology, including the environmental aspects, was reviewed and found acceptable to the Bank. Environmental aspects will also be included in an ex-post evaluation of a sample of projects.  Project Appraisal Document Page 10 Argentina Second Social Protection Project ~~~~~~~~~~~~~~~~................................................................................ ............................................................................................................................................ 19. Participatory Approach: Identification/Preparation Implementation Operation Beneficiaries/community groups CON IS, CON, COL COL (for some (for some projects) projects) Intermediary NGOs CON IS, CON, COL COL (for some (for some projects) projects) Academic institutions Local government CON IS, CON, COL COL (for the (for most projects) majority of projects) Other donors IS, CON, COL IS, CON, COL IS Other (specify) [Note: information sharing (IS); consultation (CON); and collaboration(COL).] The TRABAJAR program has been a demand-driven fund since its establishment in 1996, and thus has incorporated a participatory approach since its inception. During preparation of this project, a social assessment was carried out with a view to strengthening and refining the participatory approach in several areas. During preparation of the project, visits were made to local governments to discuss their views of the program and suggestions for improvements. During the social assessment, views and suggestions were solicited from community groups and NGOs regarding the project. Projects can be proposed by local governments, community groups or NGOs. The experience so far is that for the majority of projects the municipality is the main sponsor, although communities or NGOs are often secondary sponsors. For about 15 percent of the projects, community groups or NGOs are the main sponsor. Under the expanded project, some promotion activities will be tailored to community groups and NGOs. Each project will be evaluated, and as part of that methodology the participation of communities in project selection and their support for the project will be assessed. Supervision of the project will also include beneficiary assessments and contact with the community in which the project is located. The Bank has worked closely with IDB on the component of their National Employment Project which relates to financing for the TRABAJAR program. 20. Sustainability: The expansion of TRABAJAR is intended to be a transitional program that would be phased out gradually as the increased flexibility of the labor market together with economic growth raise the rate of job creation in the Argentine economy and thereby reduce unemployment. Thus sustainability of the TRABAJAR public employment program is not a goal of the project. In fact, we would expect the program eventually to become unnecessary. On the other hand, we expect the sustainability of the sub-projects financed under the program to be high given the high share of financing being provided by local governments and the fact that many sub-projects involve remodeling or refurbishment of existing facilities, not new construction. In addition, the strengthening of the evaluation process (including attention to design standards and operations and maintenance), promotion of more community participation, and closer supervision should contribute to sustainability of the sub-projects. In the area of cost recovery, the evaluation methodology includes a stipulation that the local practices for particular types of sub-projects (for example, basic sanitation, street paving, etc.) would be applied for any project financed by the TRABAJAR program.  Project Appraisal Document Page 11 Argentina Second Social Protection Project .. .............................................I.............................................................I..................I.......................................................................... ......................................... 21. Critical Risks (see fourth column of Annex 2): Risk Risk Rating Risk Minimization Measure Project outputs to Poor outcomes on Medium Monitoring the program development targeting to poor indicators such as objectives workers and projects targeting performance with low value to poor and inclusion of communities. evaluation studies. Project components Lack of maintenance of Low Sufficient budget to outputs Government budgetary allocation for 1997 was support for confirmed during TRABAJAR negotiations. Insufficient demand for Medium Promotion activities by projects to be financed MTSS by TRABAJAR Overall project risk rating Medium 22. Possible Controversial Aspects: None.  Project Appraisal Document Page 12 Argentina Second Social Protection Project Block 4: Main Loan Conditions 23. Effectiveness Conditions No special effectiveness conditions. 24. Other Utilization of project funds - The Borrower would ensure that the wage rates applicable to the services of temporary and fixed term workers for sub- projects shall not exceed ARG.$200/mo. (Section 3.05 ) - The Borrower would forward to the Bank for its approval the relevant documentation for all Sub-projects estimated to cost more than $350,000 equivalent after the sub-projects have been approved by the Project Management Unit. (Section 3.06 (a)(ii). Management of Project -The Project will be carried out in accordance with an Operational Manual approved by the Bank (Section 3.01 of the Loan Agreement), and will be managed by a Project Management Unit with functions and key staff with qualifications and experience acceptable to the Bank (Section 3.04 (b) of the Loan Agreement). Block 5: Compliance with Bank Policies II1 This project complies with all applicable Bank policies. x The exceptions to Bank policies are as follows: Retroactive Financing. The project provides for retroactive financing of up to 20 percent of the project costs in order to permit financing of the program during the months of April-July 1997, up to 12 months prior to loan signing. Local Cost Financing. The high share of local cost financing under the project is a consequence of the main objective of the project, which is to provide temporary employment through the financing of labor-intensive investments in social and economic infrastructure. It is justified by the need to provide a safety net for poor households who have been most adversely affected by unemployment in Argentina. The fact that the resources for the program will be targeted to Argentina's poorest areas also justifies the high local cost financing. Given the objective of the Government to expand the public employment program substantially in order to have a significant impact on the poor, and the stringent fiscal policy being implemented by the Government, it is our judgment that the financial requirements of the program would exceed the limits of available local savings and expected foreign exchange resources. The project complies with all other applicable Bank policies. [signature] bL ts A )