Argentina - Fourth Social Protection Project

Document of The World Bank Report No: 18412-AR PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$90.75 MILLION TO THE ARGENTINE REPUBLIC FOR A FOURTH SOCIAL PROTECTION PROJECT September 23, 1998 Sector Management Unit for Human Development Country Management Unit for Argentina, Chile and Uruguay Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective September 23, 1998) Currency Unit = Argentine Peso (AR$) AR$ 1.00= US$ 1.00 US$ 1.00 =AR$ 1.00 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CLDS Local Social Development Commission/Comision Local de Desarrollo Social CPP Provincial Participatory CouncillConsejo Participativo Provincial CPR Regional Participatory Council/Consejo Participativo Regional GDP Gross Domestic Product FLACSO Latin American Faculty of Social Sciences/FacultadLatinoamericana de Ciencias Sociales FONAVI National Housing Fund/Fondo Nacional de la Vivienda FOPAR Participatory Social Investment Fund/Fondo Participativo de Inversi6n Social IDB Inter-American Development Bank IMF International Monetary Fund INDEC National Institute of Statistics and Census/lnstituto Nacional de Estadisticas y Censos MCE Ministry of Culture and Education MIS Management Information System MOE Ministry of Economy, Works and Public Services/Ministerio de Economia y Obras y Servicios Puiblicos MTSS Ministry of Labor and Social Security/Ministerio de Trabajo y Seguridad Social NBI Unsatisfied Basic Needs/Necesidades Basicas Insatisfechas NGO Non-governmental Organization NUB Nucleus of Beneficiaries/Nuicleo de Beneficiarios OCEF FOPAR's Central Office!Oficina Central del Fondo PAD Project Appraisal Document PSA Agricultural Social Program/Programa Social Agropecuario QAG Quality Assurance Group SA Special Account SDS Social Development Secretariat/Secretaria de Desarrollo Social SIEMPRO Social Information and Monitoring and Evaluation of Targeted Social Programs/Sistema de Informaci6n, Evaluaci6n y Monitoreo de Programas Sociales SIF Social Investment Fund SIGEN Office of the Controller GenerallSindicatura General de la Naci6n SISFAM Beneficiary Identification System/Sistema de Identificaci6n de Beneficiarios SP Social Protection TA Technical Assistance UCAF Administration and Finance Coordination UnitlUnidad de Coordinacion de Administraci6n y Financiamiento UEC SIEMPRO's Central Unit/Unidad Ejecutora Central UPF FOPAR's Provincial Unit/ Unidad Provincial del Fondo URF FOPAR's Regional Unit!Unidad Regional del Fondo Vice President: Shahid Javed Burki Country Manager/Director: Myrna L. Alexander Sector Manager/Director: Xavier E. Coll Task Team Leader/Task Manager: Hideki Mori  ARGENTINA Fourth Social Protection Project CONTENTS Page A. Project Development Objective 1. Project development objectives and key performance indicators .............................. 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy ........................................................... 3 3. Sector issues to be addressed by the project and strategic choices ............................ 5 C. Project Description Summary 1. Project components ............................................................. 7 2. Key policy and institutional reforms supported by the project ................................ 8 3. Benefits and target population ............................................................. 9 4. Institutional and implementation arrangements ........................................................ 10 D. Project Rationale 1. Project alternatives considered and reasons for rejection ......................................... 12 2. Major related projects financed by the Bank and other development agencies ....... 13 3. Lessons learned and reflected in proposed project design ........................................ 14 4. Indications of borrower commitment and ownership .............................................. 18 S. Value added of Bank support in this project ............................................................ 18 E. Summary Project Analyses I . Economic ............................................................. 18 2. Financial ............................................................. 18 3. Technical ............................................................. 19 4. Institutional ............................................................. 19 5. Social .... , 20 6. Environmental assessment ............................................................ 20 7. Participatory approach ............................................................ 20 F. Sustainability and Risks 1. Sustainability ............................................................ 22 2. Critical risks ............................................................ 22 3. Possible controversial aspects ............................................................ 23  G. Main Loan conditions 1. Effectiveness conditions ............................................................... 23 2. Other ............................................................... 23 H. Readiness for Implementation ............................................................... 25 I. Compliance with Bank Policies ............................................................... 25 Annexes Annex 1: Project Design Summary ............................................................... 26 Annex 2: Detailed Project Description ............................................................... 29 Annex 3: Estimated Project Costs ....................... 35 Annex 4: Summary Economics Assessme ts ............................................................... 36 Annex 5: Financial Summary ............................................................... 40 Annex 6: Procurement and Disbursement Arrangements .................................................. 41 Annex 7: Project Processing Schedule ............................................................... 46 Annex 8: Documents in Project File ............................................................... 47 Annex 9: Statement of Loans and Credits ............................................................... 48 Annex 10: Country at a Glance ............................................................... 51 MAP(S)  ARGENTINA Fourth Social Protection Project Project Appraisal Document Latin America and Caribbean Region Argentina, Chile, Uruguay CMU Date: September 23, 1998 Team Leader: Hideki Mori ProjectID: 6058 Sector Manager/Director: Xavier E. Coll Sector(s). SA - Social Assistance, SY - Other Social Sector Country Manager/Director: Myrna L. Alexander Lending Instrument: Specific Investment Loan (SIL) Poverty Targeted Intervention: Yes Project Financing Data Z Loan El Credit E Grant E Guarantee D] Other (Specify) For Loans/Credits/Others: Amount (US$m/SDRm): US$ 90.75 m Proposed Terms: O To be defined D Multicurrency Z Single currency USD D Standard Variable L] Fixed Z LIBOR-based Grace period (years): 3 Years to maturity: 15 Commitment fee: 0.75% Front end fee 1.00% Financing Plan(US$m): Dl To be defined Source Local Foreign Total Government 33.0 9.1 42.1 IBRD 71.0 19.8 90.8 IDA 0.0 0.0 0.0 Total: 104.0 28.9 132.9 Borrower: The Argentine Republic Guarantor. Responsible agency(ies): Secretaria de Dessarrollo Social (Social Development Secretariat) Estimated disbursements (Bank FY/US$AM): FY 1999 2000 2001 2002 2003 Annual 8.5 19.3 27.3 25.7 10.0 Cumulative 8.5 27.8 55.1 80.8 90.8 Project implementation period: 4 years Expected effectiveness date: 01/01/99 Expected closingdate: 06/30/2003  A: Project Development Objective 1. Project development objective (see Annex 1): The primary objectives of the Fourth Social Protection Project (SP IV) would be to assist the Argentine Government in: (i) building capacities in poor communities to better manage the process to improve their welfare; (ii) providing poor communities with technical assistance and grants for beneficiary-identified small scale subprojects that would meet specific needs; and (iii) improving the focus and management of social programs by improving the availability and quality of social sector specific information, the capacity to effectively target social services to the poor, and the methodologies to monitor and evaluate social sector programs. The SP IV would be a follow-up to Parts B and C of the SP I (L3957-AR), and in spite of its similar name, would have no backward linkages to the SP II (L4195-AR) or the SP III (L4366-AR), each of which supports MTSS-implemented TRABAJAR II and III, respectively. Unlike the SP II & III, employment generation is not part of the objectives of the SP IV. The above-mentioned objectives of the SP IV would be pursued through the following two programs within the Social Development Secretariat (Secretaria de Desarrollo Social; SDS). First, the Participatory Social Investment Fund (Fondo Participativo de Inversi6n Social; FOPAR), established under the SP I as a two-year pilot program, would expand its operations. The main objective of the Fund is to build institutional capacity among the poor, and simultaneously to provide them with means to meet specific necessities. It is important to recognize that FOPAR has defined its subprojects not only as the means to satisfy specific needs of the poor, but also as the training vehicle to build and strengthen the ability to identify. define and prioritize their needs, and then mobilize and manage resources to design, implement and operate their own projects. Second, the Technical Assistance for the Improvement of Social Information and Monitoring and Evaluation of Targeted Social Programs (Sistema de Informaci6n, Evaluaci6n y Monitoreo de Programas Sociales; SIEMPRO) would enter into the second phase to establish itself as a catalyst in changing the focus and management of social programs by improving the accessibility and quality of information, promoting transparency, participation of the civil society and appropriate targeting of social services to the poor. The first half of the SIEMPRO-building period was supported under Part C of the SP I. To minimize confusions, FOPAR under the SP I and the SP IV would be referred to as FOPAR-1 and FOPAR-2, respectively throughout the rest of this document. Likewise, SIEMPRO under the SP I and the SP IV would be described as SIEMPRO-1 and SIEMPRO-2, respectively. 2. Key performance indicators (see Annex 1): For FOPAR-2: * Quality of subproject applications; * Subproject implementation and maintenance arrangements within the community; * Mobilization of, or participation in non-FOPAR resources or programs * Successful completion of subprojects; * Degree of satisfaction with the subproject by the community members; and * Participatory programs designed and implemented by the agencies. -2-  For SIEMPRO-2 * Numbers of reports and documents in circulation, workshops, participants, databases accessible on the Internet; and * Degree of user-satisfaction These and other more detailed indicators would be monitored using data available from FOPAR's MIS (see D.3. Lessons learnt and reflected to the project design) and SIEMPRO records, as well as information available through periodic ex-post evaluation of FOPAR subprojects and program evaluations (evaluation of FOPAR as a program would be carried out by SIEMPRO during the SP IV). The modified list of monitoring indicators (mostly input/process indicators) to be submitted as part of the periodic progress report were agreed during the negotiations, and would be included in the supplemental letter to the Loan Agreement with benchmarks. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): Document number: 16505-AR Date of latest CAS discussion: 05/15/97 The SP IV would support the following objectives of the Argentina CAS (Memorandum of the President of the International Bank for Reconstruction and Development to the Executive Directors on a Country Assistance Strategy of the World Bank Group for the Argentine Republic, Report No. 16505-AR), discussed by the Board of Executive Directors on May 15, 1997. (i) Enhance social development, including poverty alleviation and human development: the SP IV would finance investments in physical as well as human/social capital. The project would complement other Bank-financed poverty reduction activities in the areas of education, health and social protection; (ii) Improve the performance and institutional capacity of government, particularly sub-national governments, to deliver key social, infrastructure and environmental services: The SP IV would strengthen public sector institutions oriented towards providing the poor with essential services by improving the technical capacity of public agencies (SDS, provincial and local governments) to analyze the needs of the poor, rural communities, develop assistance strategies and contract appropriate assistance to decentralized services. 2. Main sector issues and Government strategy: Social Programs. Consolidated public social expenditures in Argentina are estimated to be about US$ 52 billion or 16.5% of GDP in 1997. The responsibilities for basic social programs, including education, health and housing, have been decentralized to the provinces. The national government, which finances approximately 60% of the consolidated public social expenditures, has relatively little flexibility and limited direct mechanisms for major changes and reallocation of social spending in the short run. About US$ 19 billion is spent every year for obligatory social security payments, and US$ 6 billion for both health (mostly for medical insurance for the elderly and health insurance for formal sector workers) and education (mostly for transfers to tertiary education). The national government also transfers nearly US$ I billion to FONAVI, a housing program based on a tax co-participation agreement between the national and provincial governments, and a similar amount to -3-  the Fondo del Conurbano, a separate housing program specifically for the province of Buenos Aires. About US$ 2 billion is accounted for by nearly 40 programs covering the major areas of labor (including programs to promote employment such as public works and wage subsidies, and unemployment insurance), compensatory education programs, services for the elderly, community services and nutrition. As a result, the leverage of the national government lies in the remaining US$ 2 billion per year or so for various types of targeted programs. Consequently, the primary challenge on the national front is to reduce duplication and to improve program design, especially on targeting. Regarding the provinces, the national government's strategy has been to provide them with an overall policy and institutional framework by establishing standards, encouraging the application of sound criteria and using a combination of moral suasion, institutional support and dissemination of best practices to improve spending at the provincial level. Several Bank and IDB supported operations, in the area of health, education and economic management, are directly helping the provinces. The Government recognizes that the programs are often fragmented and overlapping, and that administrative costs in some cases appear to be very high. To address these issues, a Social Cabinet has been organized under the Chief of the Cabinet to improve coordination among social programs. A high priority has been placed on improving the availability and the quality of social indicators and information of program beneficiaries, to effectively target poor and vulnerable groups, to identify their unmet needs, and to design and implement effective systems to satisfy those needs. Demand-driven Approach and the Ability to Participate. The objectives of the Argentine Government's social policy in recent years have been to satisfy the basic needs of the population and to provide opportunities for participating in the process of economic development to overcome the various causes and manifestations of poverty. Successful implementation of such a policy would require the type of program administration that can respond to diverse needs and demands at the local level in a transparent and participatory manner, and would depend on the ability of the intended beneficiaries, particularly the poor, to take advantage of the opportunities presented. Unemployment (14% as of October 1997) continues to be a major concern. Unfortunately, so far the Government has been unable to make progress in labor reform due to its highly politically sensitive nature, particularly concerning the area of decentralization of collective bargaining and reform of the severance payment regime. With Government requests, the Bank has been supporting TRABAJAR (temporary job creation programs targeted to the poor) under the Social Protection I, II & III respectively. Social Protection I. Within the above-mentioned context, in 1995 the Argentine Government requested the Bank's support in establishing FOPAR, a pilot Social Investment Fund which would operate in northern provinces, with future expansion in mind. Unlike TRABAJAR whose mission has been to provide temporary employment to individuals, this pilot FOPAR was expected to design and test mechanisms to build capacities of the poor in identifying and prioritizing needs, designing and implementing small projects accordingly, and mobilize resources to carry out such projects in a participatory manner. Another request was made to support the establishment of SIEMPRO, a mechanism that would contribute to the improved design and implementation of social programs by making information more widely available, by carrying out the analyses and evaluations of policies and programs, and by strengthening the capacity of provincial and national agencies in information management and analysis as well as policy and program evaluation. In response, Bank-financing was provided to FOPAR and SIEMPRO under the Social Protection I, along with other targeted interventions. -4-  3. Sector issues to be addressed by the project and strategic choices: FOPAR-2: Accomplishements under FOPAR- 1. As previously agreed with the Bank, FOPAR commissioned an independent ex-post evaluation led by an external evaluation specialist. The evaluation reviewed a total of 119 subprojects that had been completed by September 1997, and also carried out the interview of stratified sample of beneficiaries. The main finding were the following. The full text of the evaluation report is available in the project file [see Annex 8]. * FOPAR- I's targeting mechanism was highly effective. About 75% of its beneficiaries were poor, according to the definition based on unsatisfied basic needs (NBI) indicators, which are commonly used by the Argentine social programs. In addition, four-fifth of the remaining 25% were from households with monthly income of US$ 300 equivalent or less. Considering that FOPAR's support is directed to communities rather than individuals, the level of leakage was extremely low; * The mechanism of participation employed by FOPAR- I created the conditions in which the beneficiaries actively participated throughout the subproject cycle, and contributed to successful implementation of the subprojects; * A large majority of beneficiaries (83% in infrastructure type subprojects / 97% in training-technical assistance type subprojects) emphasized that the financial administration of FOPAR-provided resources in their communities were carried out in a honest and transparent way; * 96% of the beneficiaries felt that their subprojects effectively satisfied their necessities or solved their problems as designed; * 97% of the beneficiaries expressed that the support of FOPAR was indispensable in the implementation of their subprojects, and there would have been no other way to achieve what materialized through the subprojects. Under FOPAR-2, the CAS objectives stated under Section B. 1. in the above would be fully supported. It would also support the Government's policies and strategies described under Social Programs and Demand-driven Approach and the Ability to Participate in the above by maintaining the proven targeting mechanisms, participatory and demand-driven approach, and by actively supporting the capacity building of poor communities to: (a) identify projects which would address their basic needs and improve the quality of life; (b) mobilize and manage resources; and (c) take advantage of other existing social programs under the national and provincial governments. FOPAR-2 would have an annual budget of around US$ 42 million equivalent, or only about 0. 1% of consolidated annual public social spending and 1.5% of the national government's annual targeted social program budget. Naturally, it would be a complement to, but not a substitute for, other efforts in poverty reduction in the areas of education, health and social protection, each of which is designed to improve the delivery of specific types of services at a larger scale. The menu of the eligible subproject types and the targeting criteria have been deliberately constructed to avoid unnecessary duplication of efforts. For example, unlike most SIFs elsewhere, FOPAR (1 & 2) does not support the rehabilitation, construction or remodelin2 of schools. As a strategic alternative, incorporating FOPAR into TRABAJAR was discussed but abandoned for the following reasons. TRABAJAR has adopted many elements of social investment funds (SIFs), especially from the first generation funds like Bolivia Emergency Social Fund (see the Lessons Learnt). In -5-  addition, TRABAJAR and FOPAR appear similar as both finance small-scale civil works. Beyond this point, however, the two differ in their fundamental objectives, therefore require different operational modalities. For example, income supplement through rapid employment generation in poor communities is one of TRABAJAR's most important objectives, and therefore require a very short subproject cycle. Only 30% of subproject appraisal carries out site visits. Funds are disbursed as checks issued by TRABAJAR and given to individual workers who work on subprojects. FOPAR, on the other hand, places a greater importance on participation and capacity/institution building of the communities, and therefore its subproject cycle -- especially during its upstream when the community is required to reach consensus on the design of subprojects and to choose their representatives, etc. -- tends to be longer. All subproject appraisal include site visits to verify that not only technical but also social and environmental considerations were adequately taken into account. Furthermore, FOPAR supports training / technical assistance subprojects and mandates all small civil works subprojects to include a training component for maintenance and operation. Funds are disbursed to communities rather than individuals, and their representatives manage the funds and carry-out procurement actions in accordance with the FOPAR Guidelines. In some cases, FOPAR subprojects have employed community members as wage workers, but the aforementioned ex-post evaluation revealed that only 28.3% of the direct beneficiaries received remuneration, and the rest was voluntary work to satisfy the community counterpart requirements. Some comnmunities have voluntarily developed creative schemes to support poorer members. For example, a rural indigenous community where jobs are scarce, the community decided to pay twice the number of laborers at half the budgeted cost as a way of distributing income more evenly among the community and giving youth construction work experience. SIEMPRO-2: Accomplishment under SIEMPRO- 1. An evaluation study of SIEMPRO- 1 was also carried out [see Annex 8], using semi-structured interviews of the representatives of stakeholder organizations, including national as well as provincial social sector ministries and agencies, the Senate of the Nation, members of the Chief of the Cabinet unit, FLACSO (Latin American Faculty of Social Sciences), INDEC (National Institute of Statistics and Census) and the IDB. In general, these stakeholders have found SIEMPRO's contributions highly valuable for: (i) making social information and indicators widely available; (ii) fostering the culture of evaluation and transparency, which in many cases, had not existed; (iii) building the capacity to manage and analyze social sector information, particularly at the provincial level; and consequently (iv) for contributing to the design and implementation of effective social sector policies and programs. SIEMPRO-2, as a technical assistance component under the SP IV, would continue to grow as one of the Argentine Government's instruments to strengthen: (1) the information base for coordinating, designing and evaluating policies and programs; and (2) analytical capacity in the area of poverty alleviation, particularly at the level of provinces and municipalities. It would also contribute to the Government's efforts to improve the efficiency and effectiveness of social spending by supporting activities in such areas as program evaluation and targeting. One of the strategic alternatives to SIEMPRO would have been to promote and strengthen the monitoring and evaluation as well as information management of social sector ministries and agencies at both national and provincials levels. However, such an approach would still require a SIEMPRO-like mechanism to consolidate information to provide policy/decision makers with holistic views of social sector in general. It is also possible to consider private sector alternatives. However, given that poverty alleviation is accepted as the primary function of the public sector, it would be necessary to support the -6-  strengthening of information bases and analytical capacity within the public sector. By doing so, SIEMPRO-2 would continue to contribute greater private sector participation, especially through open data access, which would support private research. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): FOPAR-2: FOPAR-2 would have the following three subcomponents: (a) Community subprojects; (b) Knowledge and Methodology Transfer and Capacity Building; and (c) Project Management. See Annex 2 for more detailed discussions. (a) Community Subprojects: Through the provision of technical and financial assistance, FOPAR-2 would support the identification, design and implementation of small-scale subprojects in the poor communities in approximately 170 poorest districts in the country. While FOPAR-l's operations were limited to six northern provinces, FOPAR-2 would operate in ten northern provinces and in a southern region, consisting of poor communities in six southern provinces. The average size of subprojects is estimated to be around US$ 47,000 equivalent, and individual subproject costs would not exceed US$ 150,000 equivalent. Approximately 2,000 subprojects would be supported during a four-year period. Eligible types of subprojects are defined in the FOPAR Operational Manual, including construction of multi-purpose community centers, latrines and other rudimentary sanitation facilities, rudimentary water systems (hand-pumps and vats), pedestrian bridges and other minor civil works, training programs for leadership building and vocational skills, preservation of cultural heritage, environmental management, and community-network building. During the negotiations, it was agreed that FOPAR would not amend the FOPAR Operational Manual without the approval of the Bank [see G. Main loan conditions]. (b) Knowledge and Methodology Transfer and Capacity Building. Under this subcomponent, FOPAR-2 would promote participatory approaches through educational campaign, seminars and workshops and the provision of technical assistance to interested government agencies and programs at both central and local levels. Technical assistance would be given based on a concrete technical assistance agreement between FOPAR and the beneficiary agency, and would cover topics such as targeting, operational modalities and MIS. In addition, FOPAR would actively support the development of poor communities' capacity to manage beneficiary-identified small scale subprojects though promotion, evaluation and supervision of community subprojects. This subcomponent would also support the institutional strengthening of FOPAR through monitoring and evaluation, audits, internal staff training and capacity building. (c) Project Management. Under this component, FOPAR would establish and operationalize four new provincial units (UPFs) and provincial participatory councils in the north, and several regional units and a regional council in the southern region. This subcomponent would also support day-to-day operation of FOPAR, internal staff training and capacity building, project administration, audits and monitoring and evaluation. -7-  SIEMPRO-2: SIEMPRO-2 would continue to promote transparency, participation of the civil society and appropriate targeting of social services to the poor through the following subcomponents: (a) Social Information Base - the improvement of the social information-base for timely monitoring and analysis of the situation of the poor and vulnerable groups; (b) Evaluation and Monitoring - the development of appropriate methodologies and systems for targeting, monitoring and evaluation (ex-ante/ex-post) of social programs, and evaluation studies on a demand-driven basis; (c) Capacity Building of Provinces - the dissemination and transfer of developed methodologies and social information systems to appropriate national and provincial agencies, and (d) Social Policy Analysis - the provision of assistance to the SDS to establish priorities and assure coordination of social programs directed to the poor. For more detailed discussion of SIEMPRO-2 activities, see Annex 2. Indicative Bank- % of Component Category Costs % of financing Bank- (US$M) Total (US$M) financing FOPAR-2: Community Subprojects Physical, 98.7 74.3 69.1 70.0 Institution _building _ FOPAR-2: Knowledge and Institution 5.3 4.0 4.2 79.2 Methodology Transfer and Capacity building Building_ FOPAR-2: Project Management Project 14.0 10.5 7.5 53.6 management SIEMPRO-2: Social Information Base Institution 4.4 3.3 2.7 61.4 building SIEMPRO-2: Evaluation and Institution 2.8 2.1 2.0 71.4 Monitoring building SIEMPRO-2: Capacity Building of Institution 5.2 3.9 3.3 63.5 Provinces building SIEMPRO-2: Social Policy Analysis Institution 1.6 1.2 1.1 68.7 building Front End Fee Other 0.9 0.7 0.9 100.0 Total 132.9 100.0 90.8 68.3 2. Key policy and institutional reforms supported by the project: The SP IV seeks to deepen and extend the existing policy and institutional framework, but is not designed to carry out any new major policy or institutional reform. Both FOPAR-2 and SIEMPRO-2 would support the Government's strategic framework discussed in Section B.2 Main Sector Issues and Government Strategy of this PAD. -8-  3. Benefits and target population: FOPAR-2: Target Population and Targeting Mechanism FOPAR-2's targeting mechanism essentially remains the same as that of FOPAR- 1 (see also Section B.2. Main Sector Issues and Government Strategy). It uses poverty maps constructed with the information available from population census and living standards surveys to identify the population with unsatisfied basic needs (Necesidades Basicas Insatisfechas - NBI). In Argentina, those districts with 40% or more NBI population are considered to be under critical conditions. Among 134 such districts in the country, 110 are located in ten northern provinces. Six of them, namely Misiones, Salta, Jujuy, Chaco, Corrientes and Santiago de Estero were supported by FOPAR- 1. FOPAR-2 would add the remaining four provinces, Catamarca, Formosa, La Rioja and Tucuman to its territorial coverage. The size of the NBI population in the ten northern provinces is approximately 1.6 million, and about 45% of them are located in the urban conglomerates with population of 30,000 or more. The NBI population also represent 34.2% of the total population in the ten provinces, a number much higher than the national average of 20.1%. The ten northern provinces account for 34% of the total NBI population in the country (the province of Buenos Aires, the largest province that would not be supported by FOPAR, accounts for 54%). Unlike the North, the concentration of poverty in the South is relatively low. However, pockets of poverty exist. FOPAR has identified several target zones extending across six southern provinces (La Pampa, Rio Negro, Neuquen, Chubut, Santa Cruz and Tierra del Fuego), using the methods similar to that for the North. Additional considerations were given to the similarity of the poverty profile of the population and geographic proximity to maximize the coverage of NBI population and minimize administrative overhead. FOPAR uses slightly different approaches in rural and urban areas. In rural areas, municipalities municipios) located in districts (departamentos) with 40% or more NBI population are considered eligible for FOPAR's support. In urban areas, deprived neighborhood in districts with population of 30,000 or more would be eligible. Based on these criteria, FOPAR has identified 37 urban and 130 rural districts for the phase-2 operations. The total number of N 3I population in those districts are approximately 1.8 million, and they are FOPAR-2's primary targets. Among them, approximately 500,000 are expected to benefit from FOPAR Subprojects. Resources available for subprojects would be allocated to these districts in proportion to the NBI population of each district FOPAR would further narrow down its scope of interventions in the following way. First, the menu of eligible subprojects and the cap in subproject costs are designed to attract only poor populations. Second, local steering councils (CPP/CPR; see C.4. Implementation and Institutional Arrangements below) would identify the most vulnerable groups and the poorest communities which should receive the highest priority, based on the criteria established by FOPAR. For example, municipalities not being served by existing programs would receive a higher priority. -9-  Benefils (i! Improved institutional capacity of poor communities in needs-identification, planning, decision making, resource mobilization and other key areas of community management. Poor communities and vulnerable groups would gain experience and learn rudimentary organizational, managerial and planning skills whether their subproject applications are approved by FOPAR or not. In fact, several subproject applications have been transferred from FOPAR to other targeted social programs and supported by those programs. In addition, TRABAJAR and FOPAR are finalizing the agreement that when appropriate, TRABAJAR would accept subprojects (civil-works only) appraised and approved by FOPAR. (ii) Improved quality of life of the beneficiaries of subprojects. Specific needs of communities and vulnerable groups would be met through the implementation of subprojects. For further detail on the list of eligible subprojects, see Annex 2. (iii) Improved coordination of social programs at the provincial level. FOPAR requires each province to establish a Provincial Participatory Council (CPP: Consejo Participativo Provincial; Consejo Participativo Regional in the South) comprising the representatives of the provincial and municipal governments, NGOs and other key stakeholders. The CPPs and the CPR function as an advisory as well as a decision-making authority to establish priorities and allocate resources within the province based on the established FOPAR guidelines. This mechanism has proven effective in targeting and coordinating social programs at the provincial levels, particularly in minimizing unnecessary duplications. (iv) Improved technical capacity of selected national / provincial agencies to manage participatory social programs. It is expected that the agencies would improve the design and management of such programs using the knowledge and technology transferred from FOPAR. SIEMPRO-2: The primary direct beneficiaries of SIEMPRO-2 would be the national / provincial government agencies, domestic and national researchers (including universities and research sections of international/bilateral aid organizations) and NGOs. Better and more accessible information and stronger analytical capacity should contribute to the design and implementation of effective policies and programs, thus to poverty reduction in Argentina. 4. Institutional and implementation arrangements: Implementation period: FOPAR-2 - 48 months (January 1999 - December 2002) / SIEMPRO-2 - 39 months (January 1999 - March 2002) Institutional and implementation arrangements for both FOPAR and SIEMPRO would remain essentially unchanged. Both programs would continue to be hosted within the Social Development Secretariat (SDS), which in turn, provides administrative support to the programs through its Administration and Finance Coordination Unit (UCAF: Unidad de Coordinaci6n de Administraci6n y Financiamiento) in the areas of procurement of goods and services, payment to contractors and consultants, etc. [G. Main Loan Conditions]. -10-  Financial Manaeement At the request of the Social Development Secretariat, over the past year the Bank has been providing T.A. through a LAC Financial Management Specialist on project fmancial management, including fnancial monitoring, reporting and auditing. During this period, UCAF has incorporated significant improvements in its overall approach to project financial management, UCAF now possesses the capability to produce project monitoring information in accordance with Bank's revised standards. To ensure full utilization of the installed project monitoring capacity and to maintain the financial management system acceptable to the Bank, UCAF has endorsed an action plan involving internal training, dissemination of available fnancial management information and instructions on the feedback expected from the recipients of project fnancial management reports. FOPAR-2: FOPAR's central office (OCEF. Oficina Central del Fondo) would continue to be responsible for the overall program coordination, including strategic planning and management as well as promotion, sub-project appraisal and supervision. In addition, the external advisory group (Consejo Consultivo) consisting of representatives of public agencies, NGOs and others with significant experience in social development, would continue to provide strategic guidance to FOPAR. At the provincial level, FOPAR establishes a provincial unit (UPF: Unidad Provincial del Fondo) in each of the northern provinces, and several regional units in the south, as the primarily mechanisms to undertake promotion, community organization and sub-project supervision. In addition, a Provincial Participatory Council (CPP: Consejo Participativo Provincial; Consejo Participativo Regional in the South) -- participated in by the representatives of the provincial and municipal govermnents, NGOs and FOPAR -- functions as a decision-making authority to establish priorities and allocate resources within the province based on the established FOPAR guidelines. At the municipal level, the Local Social Development Commission (CLDS: Comisi6n Local de Desarrollo Social) identifies and prioritize needs, and assist communities in sub-project formulation. FOPAR provides CLDS with technical assistance in its initial establishment, institutional capacity building for sub-project identification, prioritization, formulation, monitoring, operation and maintenance. Finally, at the community level, the Nucleus of Beneficiaries (NUB: Nuicleo de Beneficiarios), consisting of the direct beneficiaries of the sub-project, take lead project implementation, operation and maintenance. SIEEMPRO-2: During the SP I, the SIEMPRO Unit (Unidad Ejecutora Central, or UEC) was created within the SDS with staff whose terms of reference and qualifications were satisfactory to the Bank. SIEMPRO-2 would continue to be managed by the UEC headed by a national coordinator and the heads of the divisions of Social Information, Evaluation and Monitoring; Dissemination and Transfers, Social Policy Analysis, and Informatics. During the negotiations, it was agreed that SDS would maintain the SIEMPRO UEC Coordinator and staff with qualifications satisfactory to the Bank [G. Main Loan Conditions]. Institutional arrangements with provinces also remain the same as the SP I. First, UEC (the central unit) carries out diagnostic missions to disseminate information on SIEMPRO objectives and missions, as well as to review the provincial institutional framework for social information generation and -11-  analysis. Provinces with 25% or greater population with NBI receive priorities. Once a formal request from the Office of the Provincial Governor or the Head of the counterpart agency (most of cases, the Minister of Social Action), a Subsidiary Agreement (Convenio de Adhesi6n) is drafted and signed between the SDS and the counterpart agency detailing the resources to be committed and the implementation arrangements. For any of the provinces not already covered under SP I, SDS would enter into an agreement (Convenio de Adhesi6n) with the province for the purpose offinancing capacity building [G. Main Loan Conditions]. Subsequently, a small executing unit (Unidad Ejecutora Provincial, UEP) is set up within the counterpart agency to function as the liaison office between UEC and the province. UEPs receive assistance from UEC in the form of consultants' services and computer hardware/software. SIEMPRO- 1 provided support to 13 provinces through corresponding UEPs. Approximately 10 more provinces would install an UEP and receive support from SIEMPRO-2. During the negotiations, it was agreed that SDS, in order to carry-out the second Social Survey, would: (i) enter, with INDEC, into a subsidiary agreement acceptable to the Bank no later than May 31, 1999; (ii) furnish to the Bank, for its review and comments, the draft terms of reference and a proposed design to undertake the survey no later than December 31, 1999; and (iii) carry out the survey in accordance with the agreed terms of reference, and review the survey results with the Bank no later than October 31, 2001 [G. Main Loan Conditions; Annex 2]. D: Project Rationale 1. Project alternatives considered and reasons for rejection: Discussions on strategic options (i.e. a social investment fund vs. expanding the existing social agency programs; public vs. private channels for information dissemination, etc.) are discussed in Section B.3. Sector Issues to be addressed by the project and strategic choices. FOPAR-2: Like any other project, FOPAR-2's design reflects considerations on alternatives at various levels and scopes, many of which were identified as a result of the experience gained under FOPAR-1. For related discussions, see D.3 Lessons learnt and reflected in the project design. The following are the major alternatives considered. * Microenterprise Credit. FOPAR-1, on a pilot basis, subcontracted two NGOs in the management of revolving funds for credits to urban micro-enterprises (called Famiempresa in FOPAR's terminology), including those for the self-employed to support income and employment generation. This line of activity was excluded from FOPAR-2 because the administration of a micro-credit program requires the skill mix different from that of a social investment fund. In addition, the SDS saw the Famiempresa concept promising, and decided to launch a separate urban microenterprise credit program. As a result, the personnel responsible for microenterprise credit have been transferred from FOPAR to the new program. * Province-based intervention in the South Region. FOPAR-2 would introduce the concept of region-based intervention, which did not exist under FOPAR- 1. Initially, it was considered to set up a provincial machinery (UPF and CPP; see C.4. Institutional and implementation arrangements) in each of the provinces (La Pampa, Rio Negro, Neuquen, Chubut, Santa Cruz and Tierra del Fuego) in the South. This option was discarded because of a higher percentage of administrative overhead expected -12-  from the lower concentration of the poverty in the South. * Revised menu of eligible types of subprojects. FOPAR-2 would discard a subproject type called "Strengthening of School-community Integration", which existed under FOPAR- 1 because the simnilar types of activities are supported by Plan Social Educativo. In addition, based on the analysis of the demands during FOPAR- 1, FOPAR-2 would incorporate a few new subproject types and redefine existing subproject types [see Annex 2 Table 1 for the eligible types of subprojects under FOPAR-2]. * Resource allocation by subproject type. Although the decision to discard this approach was made prior to FOPAR-1, it would be worth describing because it is a frequently debated topic. In some SIFs (elsewhere in Latin America and the Caribbean or the world), resources are allocated by the type of subprojects to promote certain types of intervention. FOPAR would not follow such a strategy because letting the communities identify their own needs and choose the type of subproject accordingly is one of the most fundamental operating principles of FOPAR. SIEMPRO-2: * Social Audit. A subcomponent to support SIGEN (Sindicatura General de la Naci6n; The Office of the Controller General) in developing capacity to carry-out integrated audit of social programs was proposed. However, given that SIGEN is responsible for auditing the SDS (therefore SIEMPRO), it was agreed that creating such a component under SIEMPRO would be inappropriate. An option to create a third component was also considered but did not mature sufficiently in time for being included under the SP IV. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). T TLatest Supervision (Form 590) Sector Issue Project Ratings (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Protecting/Improving Efficiency of Social Social Protection I (Ln. S HS Safety Net (Fully disbursed) 3957-AR - Project ID 35495) Labor Market, Employment Program Policies, Social Protection II (Ln. S S Poverty Alleviation and Social Expenditures 4195-AR - Project ID 49268) (Fully disbursed) Labor Market, Employment Program Policies, Social Protection III (Project ID S S Poverty Alleviation and Social Expenditures 49269) (Board approval June 30, 1998) _ _ Urban Management - public infrastructure, Municipal Devt I (Project ID S S community facilities and equipment, and TA 5963) Urban Management - Strengthening of Municipal Devt II (Ln. S S institutional capacity 3860-AR - Project ID 6060) Rural Development Small Farmer Dev. (Ln. S S _4212-AR - Project ID 6041) -13-  Information Gathering and Management Regional Program of Improving N/A N/A the Surveys of Living Conditions (ISLC-LAC) - IDF Grant Other development agencies Inter-American Development Bank Social Reforms, Labor Market, Poverty Support of Fiscal Adjustment Alleviation and Social Expenditures and Social Reform (871/OC-AR) Rural Development Program for assistance to Small Rural Producers (ATN/ME-544 1-AR) Urban Development Municipal Institutional Development and Social Investment Program (830/OC-AR) Labor Market Youth Productivity and Employability Support Program (103 1/OC-AR) Social Protection Program in Support of Vulnerable Groups (996/OC-AR, 1021/OC-AR, ATN/SF-5625-AR) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: FOPAR-2: The design of FOPAR-2 reflects lessons leant through FOPAR- 1, including the following: Cautious and conservative approach during the initial phase pays off. During its early days, FOPAR- 1 concentrated on internal institution building, and at the same time, maintained a very cautious attitude in subproject appraisal and approval. In fact, the number of subprojects approved during the first year was only 55. As a result, FOPAR- 1 often received comments like being too slow and too inflexible, i.e., requiring poor communities to go through unnecessary and lengthy processes, to fill out complex and lengthy forms, etc. Many of such comments, however, may have been rather short-sighted. By the end of the second year, FOPAR- 1 had accelerated the pace of implementation by 15 times, and approved 751 new subprojects, making the cumulative total to 806, of which 179 had completed and 584 were in execution. FOPAR, through its rigid appraisal process, also established the reputation that it adheres to its operational principles, in particular, community participation and transparency (for example, more than 50% of the reasons for disapproval were inadequate participatory measures). This reputation has been effective in buffering the potential of political interference, and helped ensure that resources are allocated to the areas of greater need or beneficiary-determined priorities. FOPAR-2 would apply the same cautious approach in the four new provinces and in the South Region during the initial phase. -14-  Investing in the Management Information System pays off. One of the pay-offs of concentrating on internal institution building during the initial year -- even at the expense of the speed of subproject processing -- materialized as a highly effective management information system (MIS), which is often considered in Latin America and the Caribbean as one of the best MIS implementation in a SIF. The system was one of the key factors to enable the above-mentioned rapid efficiency gain as well as the effective targeting [see B.2 Main sector issues and Government strategy]. Some of its features are: * Information on FOPAR processes. In addition to the usual information on time elapsed in each stage of the subproject cycle and workload indicators, the MIS maintains data on promotion efforts, rankings of ex-ante evaluations, number of visits by supervision staff, etc. This allows for a better understanding of FOPAR productivity and effect on subproject outcomes; for instance, whether groups that received various pre-implementation training better manage resources during execution, or whether ex-ante evaluations were effective in identifying subproject weaknesses. * Information on subproject beneficiaries. The MIS also maintains a significant amount of information on subproject beneficiaries, including names and identification numbers -- an important detail which helps in structuring any eventual surveys of beneficiaries. Routine information collected also includes age, sex, and number of years of schooling. * Fully integrated and efficient use of technology. The system automates disbursement requests from the SDS to the Bank as well as electronic transfers to subproject accounts of beneficiaries. The databases are regularly replicated between the central and provincial offices via modem to ensure information integrity and to support decentralized data processing and decision making. The technological foundations of the system are rather modest (Microsoft Windows NT Network, Microsoft SQL Server, Lotus Notes, etc.). Also, the system does not provide any eye-catching but non-essential features like colorful WEB pages. It is unique, however, in its design and implementation process. FOPAR- 1 hired a private consulting firm to carry out thorough business-process engineering. This firm observed and worked closely with FOPAR staff of all levels, and designed detailed data structure and information flow models. Subsequent system development was carried out with close consultations with the users (i.e. FOPAR managers and staff); and the system developers (i.e. the MIS Staff) and the users literally worked side-by-side. In other words, from the very beginning, FOPAR's MIS developed with the organization's management and control mechanisms. This process obviously helped identify and overcome inefficiencies and weakness of FOPAR's operational procedures and organizational structure. In addition, FOPAR's national coordinator has been exceptionally supportive and committed to the development of an effective MIS and its use by the staff. This is almost a textbook example of good (but often neglected) MIS development and operation regardless of the type of business or organization (SIF or otherwise). Formulation of core-beneficiary group increases the chance of participation. FOPAR is similar to the SIF in Peru (FONCODES) and several African countries (Zambia and Malawi) in the sense that beneficiaries are formed into groups (in Argentina, they are called NUBs - Nuicleo de Beneficiarios), which serve as the focal point for subproject preparation and implemnentation. This has allowed for participation by communities and beneficiaries which are often excluded from development initiatives. For example, 59% of NUB members are women; among urban areas, 36% are under 24 years old and 11% are adolescents [FOPAR MIS Data]. About 60% of NUB members have no prior experience in participating in systematic organizational activities that concern the welfare of their own communities. Necessity to redefine the benefits of social investment funds. Through field visits during Bank supervision missions and the ex-post evaluation, it has become clear that FOPAR has generated significant "spill-over" -15-  benefits, including the building of empowerment skills (learning to organize and speak out, belief that the poor can improve their conditions, confidence in dealing with government officials, banks and other institutions), institutional skills (identification of needs, planning and budgeting, handling of contracts, financial administration) and the transfer of skills and experience to other community groups (for example, Bank supervision mission members had several opportunities to sit in self-initiated meetings among NUBs to learn from each other). In the words of the mayor of a small city in the north, the effect FOPAR is having makes it easier for the municipal government to serve poorer areas. Such benefits are compelling when witnessed on the ground but difficult to capture in statistics, and may have a significant and lasting effect on a community or group 's ability to address poverty conditions beyond the actual benefits from the infrastructure or services contained in a subproject. For example, most members of the communities served by FOPAR have had hardly any contact with formal financial institutions. There were a number of cases that local bank tellers refused to attend to the community representatives, denied the request to open an account, or rejected (even destroyed, in some cases) FOPAR-issued checks presented by the community representatives. As a result, FOPAR -- to help the community member establish credibility in the eyes of the local bank tellers -- modified its procedure and now sends a UPF staff to accompany the community representatives when they go to a local bank for the first time to open an account and deposit the first disbursement check. Having beneficiaries administer resources can lead to lower unit costs, curb on potential corruption in subproject implementation. and foster flexibility and creativity. Record keeping, procurement and financial management by the beneficiaries have been exceptionally good. For example, during the mid-term review in July 1997, Bank staff found that only US$ 2,000 out of US$ 1 million in beneficiary-executed subproject expenditures had incomplete or inadequate documentation. Two critical factors have been: (a) training of supervisors to provide on-going technical assistance to beneficiary groups on administering subproject execution; and (b) incentives for monitoring by the community -- FOPAR staff explain administrative requirements to the entire community group (not just the representatives) and NUBs are required to keep open records which any member of the community can see. Shopping for materials and withdrawal of funds are always done by more than one NUB representative. In most cases, the NUB has chosen to self-manage infrastructure, in part to get more value for money by avoiding contractors fees. As such, unit costs are coming in significantly lower than similar projects. Community-execution of subprojects also allows greater flexibility and creativity. For example, many communities have voluntarily developed and adopted a scheme to provide paid-work to poorer members. In a rural indigenous community where jobs are scarce, the community decided to pay twice the number of laborers at half the budgeted cost as a way of distributing income more evenly among the community and giving youth construction work experience. Experience of Project Competition. Drawing on the experience of FOSIS in Chile, FOPAR, unlike other SIFs in Latin America and the Caribbean, uses project competitions (concursos de proyectos). In accordance with the targeting criteria of FOPAR, CPP (Provincial Participatory Council) selects eligible disadvantaged neighborhoods and poor districts. A period of approximately three months is designated for communities to identify their needs, form beneficiary groups (i.e. NUBs) and seek technical support in the presentation of subprojects. FOPAR promoters actively assist in this process, from organizing community meetings, orienting groups in subproject formulation and identifying technical resources available to NUBs (since geographical areas are pre-selected, promotion efforts can be highly targeted). The experience with the project competition reveals both advantages and disadvantages over the first-come, first-serve alternative, which is more commonly used in other SIFs in Latin America and the Caribbean. On the positive side, (a) it orders the pipeline and sends clear signals to beneficiary groups regarding the rules of the game (how much money is available, time frame which an approval can be expected, etc.) and thereby -16-  avoids the tremendous buildup up of subprojects waiting to be evaluated like many other SIFs experience; (b) it facilitates the contracting of technical experts to review an entire package of similar subproject proposals, and hence promotes the selection of the 'best' subprojects rather than just the first to be received; (c) it allows for the opening and closing of windows for certain subproject types and priority beneficiaries; and (d) since eligible neighborhoods and rural areas are specified in the competitions, targeting can be refined and redirected annually. On the negative side, it tends to make the pipeline lumpy. For instance, large packages of subprojects tend to cause operational bottlenecks, such as when they enter contracting and approval stages. Administrative systems and personnel must be structured to handle the peaks, which may reduce overall administrative efficiency versus a smoother pipeline flow. In addition, presentation deadlines may work against proposals from weaker groups. FOPAR-2 would continue to use the competitive mechanism, but would schedule the competition cycle in such a way to minimize peaks and down-time, and improve the technical assistance to weaker communities. The above-mentioned lessons coincide with international experience with SIFs, discussed at the forums of SIFs like the International Workshop on Social Fund at the World Bank Headquarters in May 1997 participated in by over 70 funds managers from all over the world, and documented in the following and many other literature: * Narayan, Deepa and Katrinka Ebbe, 1997. Design of Social Funds: Participation, Demand Orientation and Local Organizational Capacity (World Bank Discussion Paper No. 375) * "Portfolio Improvement Program: Review of the Social Funds Portfolio", Quality Assurance Group (QAG), the World Bank, March 1997. * Carvalho, Sonya, 1994. Social Funds: Guidelines for Design and Implementation (Human Resources Development and Operations Policy Working Paper) - Gopal, Gita and Alexandre Marc, 1994. World Bank-Financed Projects with Community Participation: Procurement and Disbursement Issues (World Bank Discussion Paper No. 265) * "Ten Years of Social Fund Activities in Bolivia" (OED Precis, May 1997) - "A Success and Challenge: AGETIP in Senegal" (OED Precis, May 1997) * Barientos, Jorge, 1998. "A practical approach for designing community-based operations - with special reference to social funds". SILEMPRO-2 Through the course of SIEMPRO-1, it has become evident that one of the most valuable contribution of the program is its technical assistance to the provinces. SIEMPRO-2 would continue strengthening this line. On the other hand, in some instances, SIEMPRO- 1 experienced difficulties in obtaining necessary cooperation and access to information in carrying out the evaluation of programs outside the SDS. Consequently, during the first year, SIEMPRO-2 would concentrate on the evaluation of the program inside the SDS. The evaluation of the programs outside the SDS would be demand-driven. Furthermore, to ensure that SIEMPRO-2's products would serve the needs of stakeholders as well as to improve the coordination with partnership agencies like INDEC, SIEMPRO-2 would form an Advisory Council consisting of the representatives from social sector agencies, partnership agencies, the academic and NGO communities [G. Main Loan Conditions]. In addition, SIEMPRO-2 would take advantage of the Bank's expertise in poverty analysis and social surveys. The Bank would be also instrumental in transferring lessons and experience from other clients as well as the OECD countries. -17-  4. Indications of borrower commitment and ownership: The borrower's commitment to the project has been fully demonstrated by the 'strong performance of the SP I. 5. Value added of Bank support in this project: The Bank's support has facilitated the provisions of knowledge and expertise to FOPAR/SIEMPRO (see also D. 3. Lessons learned and reflected in proposed project design). E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): O Cost-Benefit Analysis: NPV=US$ million; ERR = % o Cost Effectiveness Analysis * Other FOPAR-2: Detailed discussions on the economic analysis of FOPAR can be found in Annex 4. In essence, FOPAR-2 would appraise subprojects in accordance with the revised version (August 1998) of the Project Cost Manual, originally developed and used during FOPAR- 1. Economic analysis would be of the cost-effectiveness analysis type by applying unit cost based cut-off points which would be updated on an on-going basis utilizing the subproject data accumulating in the MIS. The Project Cost Manual will be revised once every year. For those subprojects involving infrastructure, minimum unit costs would be specified for mostly materials to ensure quality. Some elements of cost-benefit analysis may be applied for subprojects to support productive activities. SAR for the SP I estimated the administrative expenditures under FOPAR- 1 to be about 30% of the total cost, considering the pilot nature and the relatively small size of the project, while it has in reality come down to 16%. The cost definitions employed under FOPAR- 1, however, treated the entire costs for community capacity building through the processes of promotion, ex-ante evaluation and supervision of subprojects as administrative expenditure, and consequently, made the administrative expenditures appear higher than they actually were. FOPAR-2 has revised the cost definitions to treat the field time spent by the promoters, evaluators and supervisors in communities as investrnents in capacity building. Using the revised definition and based on the expected efficiency gain resulting from the institutional strengthening achieved under FOPAR- 1, the administrative expenditures under FOPAR-2 are estimated to be around 10%. SILEMPRO-2: Not applicable (Technical Assistance Project) 2. Financial (see Annex 5): NPV=US$ million; FRR= % FOPAR-2, SIEMPRO-2 and all subprojects under FOPAR-2 would be non revenue-generating projects. Financial impact of FOPAR subprojects on the beneficiaries would remain at the manageable level. -18-  During the preparation of FOPAR- 1, the average size of subprojects and the average amount of community contribution as a percentage of the subproject cost were estimated to be US$ 26,000 and 7.0%, respectively. In reality, they exceeded the estimates, reaching US$ 38,000 and 11.3%, respectively, and demonstrated the capacity and commitment of the beneficiaries to assume financial responsibility. Operation and maintenance of completed subprojects is estimated to average about 2% of the investment costs, and borne largely by the communities. Fiscal Impact: The SP IV's fiscal implications, both during and after implementation, would also remain at the manageable level. The Government's counterpart funds are estimated to be US$ 42.1 million over four years (approximately US$ 10.5 million per year, or 0.003% of GDP) during the project implementation. If the Government institutionalized FOPAR and SIEMRPO after the completion of the SP IV, the combined annual budget for the both programs would be approximately 0.0 16% of the consolidated social spending, or 0.6% of the targeted social programs. 3. Technical: Technical criteria to evaluate FOPAR subprojects are detailed in the Operational Manual and the Project Presentation Guide for each type of subprojects. These documents were reviewed by Bank-hired consultants and found satisfactory. The ex-post evaluation also showed that quality of works of subprojects under FOPAR-1 were mostly good or acceptable. Subproject appraisal would be carried-out by qualified consultants / NGOs contracted by FOPAR. 4. Institutional: a. Executing agencies: The Social Development Secretariat (Secretaria de Desarrollo Social) Through the successful implementation of Parts B. and C. of the SP I, the SDS has proven its capacity to adequately carry-out the SP IV, including agreed procurement arrangements, fnancial management and reporting, and to achieve the development objectives of the SP IV. At present, there is no notable institutional weakness within the SDS which might seriously hinder the SP IV implementation. Technical assistance planned under FOPAR-2 and SIEMPRO-2 would strengthen the areas of expertise and capacities specific to the implementation of the programs. b. Project management: The existing management arrangements for FOPAR-1 and SIEMPRO-1 would remain essentially the same, as they have proven effective. Day-to-day project management on substantive matters (strategic planning, activity monitoring, etc.) would be handled by the FOPAR and the SIEMPRO units within the SDS, headed by the respective national coordinators. All other administrative and financial functions would continue to be carried out by the Administrative and Financial Control Unit (UCAF). The coordinator of UCAF has the same rank as the coordinators of FOPAR and SIEMPRO. This arrangement was sought by the SDS management to increase project management efficiency by serving both programs, and to ensure fnancial transparency and control. The only difference from the SP I would be the transfer of the functions to process grant agreements with beneficiary communities. While these functions were assumed by UCAF under the SP I, they would be transferred to FOPAR under the SP IV because of a larger number of subprojects. -19-  5. Social: Social Assessment of FOPAR and SIEMPRO was carried out by a Bank-hired consultant using the Strategic Compact resources in accordance with the guidelines laid out by ESSD. In addition, social impact of the programs were assessed through aforementioned the ex-post evaluation of FOPAR and the evaluation of SIEMPRO [see B.2. Main sector issue and Government Strategy; Annex 8]. These studies clearly showed that both programs contributed very positively to greater community participation (including that of vulnerable groups, women, youth and indigenous populations), transparency and promotion of civil society. The main recommendations, most of which are the fine-tuning of the existing schemes, have been incorporated into the design of the SP IV. Indigenous Populations. In Argentina, the indigenous population are often reluctant to be identified as indigenous. However, studies have shown that about 90% of the country's approximately 500,000 indigenous population resides in the northern 10 provinces where FOPAR would operates. FOPAR has estimated that about 19.8% of the target population (see Section 3) in those provinces can be considered indigenous. Considering the high incidence of poverty among the indigenous population, many poor indigenous communities would by definition benefit from FOPAR, although it does not have special provisions for earmarking resources to indigenous populations due to the aforementioned self-identification difficulty and the existence of other government programs specifically designed for indigenous populations. Negative biases against indigenous communities would be minimized in accordance with the procedures set forth in the FOPAR Operational Manual as well as in Elements to consider concerning the issue of indigenous communities at FOPAR, May 1996. In addition, some subproject types like "Preservation of Cultural Heritage" may be more appealing to indigenous communities, provided that the communities placed higher a priority to such types than to other types of subprojects. Gender Issues. According to FOPAR's MIS, about 54% of direct beneficiaries of subprojects under FOPAR- 1 were women. Therefore, no additional mechanisms would be necessary to avoid bias against women. 6. Environmental assessment: Environment Category D A Z B El C The SP IV has been assigned a B category. FOPAR-2 subprojects are expected to remain small (the expected average size is $47,000; the average during FOPAR-1 was US$38,000), and most of the environmental impacts should be predictable and subsequently avoided or mitigated with common practice. Sections of FOPAR Operational Manual and Project Presentation Guides concerning the environment have been reviewed by Bank staff and found acceptable. 7. Participatory Approach: a. Primnary beneficiaries and other affected groups: The effectiveness of FOPAR's participatory mechanism has been proven through FOPAR- 1. Beneficiaries would continue to be the main actors throughout preparation, implementation and operation of subprojects. Primary beneficiaries of SIEMPRO include national and central government agencies (including Bank-supported programs like FOPAR and TRABAJAR), public and private research institutes, -20-  NGOs and donor organizations. They have been fully consulted, and would provide timely feedback through various channels including the steering committee. b. Other key stakeholders: FOPAR has already established a consultative advisory group consisting of the representatives of public, private, NGO and academic sectors. Provincial and municipal governments as well as representatives of local NGOs are fully integrated into the Provincial Participatory Council, and play active roles in targeting, prioritization and subproject preparation, approval and supervision. The table below summarizes the role of various types of stakeholders under the SP IV. Preparation Implementation Operation Primary beneficiaries FOPAR-2: FOPAR-2: FOPAR-2: and other affected IS, CON, COL IS, CON, COL IS, CON groups SIEMPRO-2: SIEMPRO-2: SIEMPRO-2: CON, COL IS, CON, COL IS, CON, COL Intermediary FOPAR-2: FOPAR-2: FOPAR-2: organizations, including IS, CON, COL IS, CON, COL IS NGOs and private sector SIEMPRO-2: SIEMPRO-2: SIEMPRO-2: CON, COL IS, CON, COL IS, CON, COL Local Governments FOPAR-2: FOPAR-2: FOPAR-2: IS, CON, COL IS, CON, COL IS SIEMPRO-2: SIEMPRO-2: SIEMPRO-2: IS, CON, COL IS, CON, COL IS, CON, COL Central Government FOPAR-2: FOPAR-2: FOPAR-2: Agencies IS, CON IS, CON, COL IS SIEMPRO-2: SIEMPRO-2: SIEMPRO-2: IS, CON, COL IS, CON, COL IS, CON, COL Other donors FOPAR-2: FOPAR-2: FOPAR-2: IS, CON IS, CON IS, CON SIEMPRO-2: SIEMPRO-2: SIEMPRO-2: IS, CON IS, CON IS, CON Note: IS = information sharing; CON = consultation; COL = collaboration -21-  F: Sustainability and Risks 1. Sustainability: The Argentine Government has frequently expressed its intentions to fund FOPAR and SIEMPRO without external financing in the future. Given that these programs' overall fiscal impact is very small, and that they are both proving their worth, their sustainability-potentials are high. Considering the presidential election scheduled towards the end of this year, however, the concrete plans for sustaining FOPAR and SIEMPRO would have to be discussed with the new administration. The best opportunity to for such discussions would be the mid-term review. Therefore, it has been agreed that: (i) No later than August 31, 2000, FOPAR would submnt to the Bank's review an input to the mid-term review (to be carried out by October 31, 2000), including a plan detailing organizational, financial and operational arrangements beyond the Project completion date; (ii) No later than April 30, 2000, SIEMPRO would submit to the Bank's review as an input to the mid-term review (to be carried out by June 30, 2000), including a plan detailing organizational, financial and operational arrangements beyond the Project completion date [see G. Main Loan conditions] (Note: SIEMPRO-2 is expected to complete in three years and three months, and thus the timing of its mid-term review would be earlier than that of FOPAR-2, which is a four-year project). As for FOPAR subprojects, there are many encouraging signs. Based on social, technical and economic considerations, the ex-post evaluation concluded that 80% of the infrastructure-type subprojects within the sample had medium-to-high chance of sustainability. However, considering the relatively short experience of FOPAR-1 and the small sample size, the sustainability of subprojects would require continuous monitoring through periodic ex-post evaluations (see G. Main loan conditions; Annex 2). 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): RRisk sk Rating Risk Minimization Measure From Outputs to Objective Overall economic, social and political M Dialogue with the authorities / close conditions of the beneficiaries (poor monitoring of economic and social communities / local governments / conditions SIEMPRO products users) may change radically or deteriorate as a result of the change of the Administration and the agreement with IMF Depending on the conditions that surrounds M Adjustment of the types and the contents the intended beneficiaries, the project of outputs based on the feed back from outputs may not be valuable the beneficiaries From Components to Outputs The Government/SDS may change the S Close monitoring of budgetary allocations overall resource allocation and institutional and adjustment of implementation plans; framework for the project as a result of the Restructuring / phasing of the project as change of the Administration and agreement necessary with IMF _- The level of demand for FOPAR N Promotional activities, consultations and subprojects, TA for Knowledge and public relations Transfer, SIEMPRO Products may be low _________________________ -22-  Overall Risk Rating M I Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: None G: Main Loan Conditions 1. Effectiveness Conditions No special condition of effectiveness 2. Other [classify according to covenant types used in the Legal Agreements.] Flow and Use of Project Funds * FOPAR would not disburse against subprojects in the Southern Region (consisting of the provinces of La Pampa, Rio Negro, Neuquen, Chubut, Santa Cruz and Tierra del Fuego) until the Regional Participatory Council and at least one Regional FOPAR Unit (URF) have been established [Annex 2]. * In the Northern Provinces, FOPAR would not disburse against subprojects in any province until the Provincial Participatory Council (CPP) and the corresponding Provincial FOPAR Unit (UPF) have been established [Annex 21. * FOPAR would submit for Bank's no-objection: (a) the first two technical assistance agreements under the (b) Knowledge and Methodology Transfer and Capacity Building subcomponent [Annex 2]; (b) any proposed subproject that, according to the terms of the FOPAR Operational Manual, requires the undertaking of environmental protection and mitigation measures and/or resettlement of population, including the corresponding environmental assessment and/or resettlement plan, which shall have been prepared in accordance with the procedures for environmental and social impact assessment and mitigation set forth in the FOPAR Operational Manual [C. 1. Project Components]; (c) any proposed subproject which requires the undertaking of measures to ensure the participation in the subprojects of vulnerable communities, including the indigenous populations, as set forth in the Operational Manual; (d) any proposed subproject which does not correspond to the list of eligible subprojects set forth in the Operational Manual; * FOPAR would not finance: (a) any proposed subproject estimated to cost US$ 150,000 equivalent or more [Annex 2]; (b) any proposed subproject estimated to cost US$ 100,000 or more but less than US$ 150,000, once the aggregated cost of subprojects within this cost range has reached or exceed US$ 10.0 million [Annex 2]. -23-  Manaaement Aspects of the Project or Executing Agency * Throughout the project implementation, the Borrower, through the SDS, will maintain the national coordinator and line and regional managers, all with qualifications and experience acceptable to the Bank for the management of FOPAR [Annex 2]; * The Borrower through SDS would cause FOPAR to be operated in accordance with the FOPAR Operational Manual, which the Borrower would not amend, suspend, abrogate or waive without the Bank's approval [C. 1. Project Component; Annex 2]; * The Borrower would maintain the SIEMPRO UEC with the organization and staffing acceptable to the Bank [C.4. Implementation and Institutional Arrangements]. * The Borrower through SDS would cause SIEMPRO to be operated in accordance with the SIEMPRO Matrix of key activities, which the Borrower would not amend, suspend, abrogate or waive without the Bank's approval [Annex 2]; * SIEMPRO would establish an advisory council with terms of reference and the membership acceptable to the Bank no later than July 31, 1999 [Annex 2]. * For any of the provinces not covered under SP I, SDS would enter into an agreement (Convenio de Adhesi6n) with the respective province for the purpose of financing capacity building [C.4. Institutional and Implementation Arrangements]. 3 In order to carry-out the second Social Survey, SDS would: (i) enter, with INDEC, into a subsidiary agreement acceptable to the Bank no later than May 31, 1999; (ii) furnish to the Bank, for its review and comments, the draft terms of reference and a proposed design to undertake the survey no later than December 31, 1999; and (iii) carry out the survey in accordance with the agreed terms of reference, and review the survey results with the Bank no later than October 31, 2001 [C.4. Institutional and Implementation Arrangements; Annex 2]. * For the purpose of providing administrative, financial and information management and legal support to FOPAR and SIEMPRO, SDS would maintain the coordination unit (UCAF) established under SP I, with appropriate organization and staffing acceptable to the Bank [C.4. Institutional and Implementation Arrangements]. Monitoring. Review and Reporting * The Borrower will submit semi-annual progress reports in accordance with the format agreed with the Bank by February 28 and August 31 of each year of project implementation. * No later than August 31, 2000, FOPAR would submit to the Bank, as an input to the mid-term review, an in-depth report integrating the analysis of implementation progress. * Mid-term review of FOPAR would be carried out no later than October 31, 2000. * FOPAR would make available a copy of each subproject summary for the Bank's ex-post review in a format acceptable to the Bank. * No later than April 30, 2000, SIEMPRO would submit to the Bank, as an input to the mid-term review, an in-depth report integrating the analysis of implementation progress. * Mid-term review of SIEMPRO would be carried out no later than June 30, 2000. * No later than January 31, 2000 and annually thereafter, the Borrower would contract an independent consultant in accordance with terms of reference acceptable to the Bank in order to carry out the -24-  procurement audit of contracts for goods and consultant services for both FOPAR (except for subprojects, which are reviewed as part of the annual technical audit) and SIEMPRO; the procurement process of the consultant should commence by June 30, 1999 [Annex 2; Annex 6]. * No later than January 31, 2000 and annually thereafter, FOPAR would commission annual independent technical audit of its subprojects, in accordance with terms of reference acceptable to the Bank; the procurement process of the consultant should commence by June 30, 1999 [Annex 2; Annex 6]. * The Borrower would prepare and furnish no later than six months after the closing date, a plan for the future operations of the project, and afford the Bank a reasonable opportunity to exchange views. H. Readiness for Implementation 0 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. 1 1. b) Not applicable. 1 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. Z 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. DH 4. The following items are lacking and are discussed under loan conditions (Section G): 1. Compliance with Bank Policies D 1. This project complies with all applicable Bank policies. Z 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. The relatively high local-cost financing percentage as well as Bank financing percentage are the consequence of one of the main objectives of the SP IV, which is to provide the poor community through small-scale subprojects. These are justified based on the fact that Argentina's poorest populations are effectively targeted. S or Management Unit Country t Uit Task Team Leader irector Director Xavier Coll Myrna Alexander -25-  Annex 1 Social Protection IV Project Design Summary Narrative Summary Key Performance Indicators J Monitoring & Supervision Critical Assumptions Sector-related CAS Goal (Goal to Bank Mission) * Enhance social * Poverty indicators, human * ESW, relevant statistics, development, including development indicators, studies poverty alleviation and human economic indicators development * Improve the performance * Contents, delivery and institutional capacity of mechanisms and outcomes of government, particularly social and economic policy sub-national governments, to deliver key social, infrastructure and environmental services Project Development (Objective to Goal) Objective * Improve the capacity of the * Quality of subproject * Subproject appraisal / * Capacity-building at the poor in the identification, applications; supervision reports; community level would make design, implementation, * Subproject implementation * Periodic ex-post evaluation significant impact in poverty maintenance and operation of and maintenance of subprojects alleviation small scale projects arrangements within the (FOPAR-2) community; * Mobilization of, or participation in non-FOPAR resources or programs * Attend specific needs of the * Successful completion of * Subproject supervision poor communities (FOPAR-2) subprojects; reports; * Degree of satisfaction with * Periodic ex-post evaluation the subproject by the of subprojects; community members * Improve the capacity of * Participatory programs * Feedback from TA * With improved capacity, provincial/national social designed and implemented by recipients provincial and national sector agencies in the design the agencies agencies will implement more and implementation of * Review of implementation effective social programs participatory programs arrangements, budget and (FOPAR-2) organizational framework of the programs designed * Improve the accessibility * Numbers of reports and * SIEMPRO Records * Availability of information and the quality of social sector documents in circulation, would trigger behavioral information (SIEMPRO-2) workshops, participants, changes strong enough to databases accessible on the result in better social policies Internet; . -26-  r Degree of user-satisfaction * Feedback from users (incl. ,the Bank) l Narrative Summary | Key Performance Indicators Monitoring & Supervision | Critical Assumptions Outputs (Outputs to Objective) * Subproject promotion / * Number and profile of * Reports prepared by * Overall economic, social capacity building (FOPAR-2) communities visited by promoters and political conditions of the FOPAR promoters (e.g. No. beneficiaries (poor communities that applied for a communities / local subproject over No. of governments / SIEMPRO communities that received products users) do not change promotion; 90%) radically or deteriorate (medium risk, due to the expected change of the Administration; the agreement with IMF). * Subprojects that are * Number of subprojects * Final supervision reports of The outputs are valuable to the successfully completed successfully completed subprojects; MIS Data beneficiaries under the (FOPAR-2) (approximately 500/year) specific circumstance and conditions surrounding them (medium-risk) * TA agreements that are * Number of agreements * TA completion reports successfully fulfilled fulfilled; type and scope of TA (FOPAR-2) provided * Reports, documents, studies, * Number products by product * SIEMPRO record databases, workshop/seminars category and TA (SIEMPRO-2) Narrative Summary Key Performance Indicators Monitoring & Supervision Critical Assumptions Project Components / Inputs: (budget for each (Components to Outputs) Sub-components: component) FOPAR-2 US$118.0 million * MIS Data; subproject * The Government/SDS appraisal / supervision reports; maintains the overall resource 1. Community subprojects (US$ 98.7 million) TA progress reports; allocation and institutional * Technical assistance procurement files; framework for the project * Grant financing disbursement data (medium-risk) 2. Knowledge and (US$ 5.3 million) * Sufficient demand from the methodology transfer * Technical assistance intended beneficiaries exists for FOPAR subprojects, TA 3. Project Management (US$ 14.0 million) for Knowledge and Transfer, * Technical assistance SIEMPRO Products (low-risk) * Office equipment * Training SIEMPRO-2 US$ 14.0 million * Technical assistance * Office equipment * Training 1. Social Information (US$ 4.4 million) -27-  2. Evaluation and Monitoring (US$ 2.8 million) 3. Capacity Building of (US$ 5.2 million) Provinces 4. Social Policy Analysis (US$ 1.6 million) The supplemental letter to the Loan Agreement would include a detail list of monitoring indicators to be reported to the Bank semi-annually with benchmarks. -28-  Annex 2: Project Description By Component: Project Component 1 - US$118.0 million FOPAR-2: Participatory Social Fund Phase 2 FOPAR-2 would have the following three subcomponents: (a) Community subprojects; (b) Knowledge and Methodology Transfer; and (c) Project Management. Subcomponent (a): Community subprojects (US$ 98.7 million) Under the SP I, FOPAR (Fondo Participativo de Inversion Social) established itself as a program of the SDS and supported over 800 community subprojects in Misiones, Salta, Jujuy, Chaco, Corrientes and Santiago de Estero. In addition to the aforementioned six provinces, FOPAR-2 would support community subprojects also in Catamarca, Formosa, La Rioja and Tucuman. In each of these newly-added provinces, a UPF (Unidad Provincial del Fondo: Provincial FOPAR Unit) as well as a CPP (Consejo Participativo Provincial: Provincial Participatory Council) would be established. Furthermore, FOPAR would establish one or more Regional FOPAR Unit(s) (URF: Unidad Regional del Fondo) and a Regional Participatory Committee (CPR: Consejo Participativo Regional) to support subprojects in six southern provinces (La Pampa, Rio Negro, Neuqudn, Chubut, Santa Cruz and Tierra del Fuego). Unlike the northern provinces, concentration of poverty in the south does not justify the establishment of province-by-province machinery. During the negotiations, it was agreed that FOPAR would not disburse against subprojects in: (a) any Northern province until the corresponding Provincial FOPAR Unit and the Provincial Participatory Council are both established; and (b) the Southern Region until the Regional Participatory Council and at least one Regional FOPAR Unit are established [see G. Main Loan Conditions]. The average size of subprojects is estimated to be around US$ 47,000 equivalent, and individual subproject costs would not exceed US$ 150,000 equivalent. In addition, the aggregated subproject costs of those costing US$ 100,000 or more but less than US$ 150,000 would not exceed US$ 10.0 million. During the negotiations, it was agreed that: (i) subprojects would be carried out within these cost limits; and (ii) no later than January 31, 2000 and annually thereafter, FOPAR would commission annual independent technical audit of its subprojects, in accordance with terns of reference acceptable to the Bank, and commence the procurement process of the consultant for such an audit by June 30, 1999 [see G. Main Loan Conditions]. Approximately 2,000 subprojects would be supported during a four-year period. Line 1: Community-based subprojects Menu of Eligible Subprojects. This line builds directly on FOPAR activities supported by the SP I. The types of eligible community subprojects are specified in the revised FOPAR Operational Manual, as summarized in Annex 2, Table I below. Subprojects under Area I: Community Development and Capacity Building and Area IV: Economic and Productive Activities as well as Environmental Protection (under Area III) would be modest technical assistance or training programs. Other subprojects would involve the procurement of goods and small-scale works. -29-  Annex 2, Table 1: Community subproject typology under FOPAR 2 Area 1: Community Development and Capacity Building (mostly TA/training) * Leadership training * Popular Communication (,cl. Goods/equipment) * Capacity building of community-based organizations * Project preparation