Document of

The World Bank

FOR OFFICIAL USE ONLY

LAI 7 0 - e Report No. 8941-VE

STAFF APPRAISAL REPORT

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

OCTOBER 30, 1990

Human Resources DivisionCountry Department IIILatin America and the Caribbean Regional Offiee

This docanent has a restdcted dbstribtIon and ny be used by oecipets ony in the pedoumne oftheir offiefd dueti Its ontents may no oterwie be dicosed wihout Wodd Bnk amimrh tlo .

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CURRENCY EOBUIVALRNTS(as of June 30, 1990)

Current Unit - Bolivar (Bs)

US$1.00 - Bs 47.5US$1 million - Bs 47.5 million

US$21,000 - Bs 1 million

FISCAL EAJanuary 1 - December 31

ACADEmiC YEAROctober 1 - July 31

PRINCIPAL ABBREVIATIONS AND PRONYMS USED

CPAPS Permanent Primary Health Care Commission(Comisi6n Permanente de Atenci6n Primaria an Salud)

COPEP Presidential Committee for Poverty Alleviation(Comisi6n Presidencial para el Enfrentamiento a la Pobreza)

CORDIPLAN Ministry of Coordination and Planning(Ministerio de Planificacifn y Coordinaci6n)

EAH Expanded Household Survey(Encuesta Ampliada de Hogares)

FONVIS Venezuelan Fund for Social Investment(Fondo Venezolano de Inversi6n Social)

GOV Government of VenezuelaIEC Information, Education and CommunicationsINN National Institute of Nutrition

(Instituto Nacional de Nutrici6n)IVSS Venezuelan Social Security Institute

(Instituto Venezolano de Seguro Social)LSMS Living Standards Measurement SurveyMINDUR Ministry of Urban Development

(Ministerio de Desarrollo Urbano)MINFAM Ministry of the FamilyMOE Ministry of EducationMOH Ministry of HealthNGO Non-Governmental OrganizationOCRI Central Office of Statistics and Information

(Oficina Central de Estadistica e InformAtica)OTC Technical Coordination Office, Ministry of the Family

(Oficina T6cnica de Coordinaci6n)PAMI Expanded Maternal-Child Health Care Program

(Programa Ampliado Materno-Infantil)PMU Project Management UnitSAL Structural Adjustment LoanSISVAN Information System for Nutritional Surveillance

(Sistema de Vigilancia Alimentaria y Nutricional)

FOR OMCIAL USE ONLY

SOCIAL4 DEVE10PmN2anQE

Table of Contents

Paro No.

BASIC DATA SHEET ........................................ iii

LOAN AND PROJECT SUMARY ................................. v

I. INTRODUCTION . ............................................ 1

II. TME SOCIAL SECTORS .......... ............................. 3

Background . .............................................. 3Issues in the Social Sectors .............................. 7Government Strategy ...................................... 10Bank Role and Strategy ................................... 12Rationale for Bank Involvement ............................ 13

III. THE PROJECT .I.............................................. 14

Objectives ............................................... 14Policy Framework ......................................... 14Project Components ....................................... 16

Primary Health Care .................................. 16Pre-School Development ............................... 19Information, Education and Communications ............. 21Institutional Development ............................ 23

Project Implementation and Management ..................... 25

IV. PROJECT COSTS. FINANCING. PROCURZMENT AND DISBURSEMENTS ..27

Costs .................................................... 27Financing ................................................ 28Procurement .............................................. 30Disbursements ............................................ 32Auditing and Reporting ................................... 34

V. BEWEFITS AND RISKS ....................................... 35

Benefits ................................................. 35Risks .................................................... 35

This report is based on the findings of a pre-appraisal mission which visitedVenezuela in March 1990 comprising C. Valdivieso (Mission Leader), M. Riboud(Economist), J. Newman (Economist), B. Carlson (PHN specialist) and F. Vio(Consultant); and an appraisal mission which visited Venezuela in May 1990comprising C. Valdivieso (Mission Leader), M. Riboud (Economist), B. Carlson(PHN specialist), A. Kogan and M. Bravo (Consultants).

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Table- o Congents (continued)PAge No.-

VI.S AG=&g AND RZEL Qi2=QN .................... 36

Agreeements Reached .................................... 36Recommendation .................................... 37

LIST OP TABLES IN MAN REPORT

Table 4.1: Summary of Project Costs by ComponentTable 4.2: Summary of Project Costs by Category of ExpenditureTable 4.3: Financing PlanTable 4.4: Procurement ArrangementsTable 4.5: Disbursement Forecast

LIST OP ANMEMES

1. Social Development IndicatorsTable 1: Comparative Social Indicators in Selected CountriesTable 2: Venezuela: Health Status - Comparative IndicesTable 3: Venezuela: Population ProjectionsTable 4: Venezuela: Primary Health Care Facilities by Region

2. Public Expenditures in the Social Sectors3. Poverty Indicators

Table 1: Percentage of Families Living in Poverty Conditionsby Region

Table 2: Regional Poverty Indicators4. Description of Key Targeted Social Programs Expanded or

Established since 19895. Social Sectors Action Program6. Project Cost Estimates

Table 1: Project Components by YearTable 2: Project Components by Year, Totals Including ContingenciesTable 3: Summary Accounts by YearTable 4: Summary Accounts by Project Component

7. Project Implementation Schedule8. Key Indicators of Project Implementation9. Selected Documents and Data Available in the Project File

CHIARTS

Chart 1: Organizational Structure of the Ministry of HealthChart 2: Organizational Structure of the PAMI FoundationChart 3: Organizational Structure of the Ministry of Education and

PREESCOLAR FoundationChart 4: Organizational Structure of the Ministry of the Family and the

Technical Coordination Office

DW: IBRD No. 20575October 30, 1990

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Gasic Cats Ibe_t

DAM TEAR

A. GENERAL COUNTRY DATA:

1. Population Estimate (million) 18.6 1968

2. Area t'000 Square Kilometers) 912 1990

3. WUP per Capita (USS) 3,230 1987

4. 6NP per Capita Average Annual Growth Rate (X) -0.9 1965-87

5. Income Share of Poorest 20% CX) 3.0 1967

6. Population Living in Extreme Poverty (X) 22.3 1989

7. Population Living in Critical Poverty CX) 31.4 1969

B. POPULATION DATA:

1. Crude Birth Rate (Per 1000) 30.6 198?

2. Crude Death Rate (Per 1000) 5.4 198?

3. Annual Rate of Population Growth (X) 2.7 1988

4. Total Fertility Rate 3.8 1986

5. Maternal Mortality Rate (Per 10,000) 65 1980-87

6. Infant Nortality Rate (Per 1000) 36 1987

T. Life Expectancy at Birth (Years) 70 1987

C. HEALTH DATA:

1. Population per Physician 700 1984

2. Population per Nurse 1,900 1984

3. Public Health Expenditures

As X Total Central Goverruent Budget 9.3 1985

As X of GDP 2.6 1965

In per Capita US$ 63 1987

D. NUTRITION DATA:

1. Daily Calorie Supply 2,494 1986

2. Babies with Low birth Weights (X) 9 1982-87

3. Calorie Intake as X of Requirements 114 1986

4. Per Capita Protein Intake (grams/day) 66 1987

5. Index of Food Production per Capita 92.9 1979-81.100

E. EDUCATION DATA:

1. Adult Illiteracy Rate tX) 9.5 1989

2. Female Illiteracy Rate (X) 11.2 1969

3. Net Enrollment Rates:

Primary Education 85 196?

Secondary Education 38 1967

Higher Education 22 1987

4. Public Education Expenditures:

As S of Total Central Goverrnent Budget 21.1 1985

As X GOP 5.9 1985

In per Capita USS 139 1987

SOURCES: World Bank, Social Indicators of Development, 1989; World Bank, World Developgent Report, 1969;World Bank, Human Resources in LAC: Basic Indicators, July 1989; and Nission Estimates.

WAN AND PROJECT SUNNYRY

slorrower: Republic of Venezuela

en2ficiarffie: Ministry of Health (MOH), Ministry of Education (MOE),and Ministry of the Family (MINFAM)

Amount: US$100.0 million equivalent

Tonms: Payable in 15 years, including a 5-year gace period, atthe Bank standard variable interest rate.

Project hblectivesand Descriotion: The objective of the proposed project is to assist the

Government of Venezuela (GOV) in developing a socialsector strategy to redirect its social expenditures intowell-targeted and efficient programs, by financing highpriority activities, within the framework of its SocialSectors Action Program. It aims to: (a) improve livingconditions of a large and poor segment of the population,especially pregnant and lactating women, and childrenunder six years of age, while mitigating the potentialadverse impact of the adjustment program; (b) replaceindirect subsidies with targeted social programs, whileimproving their efficiency and rationalizing theirdistribution; and (c) promote institutional developmentby improving the planning and management capacity in theMinistries of Health and Education, as well as 'iecapacity to target, develop and monitor social programsin the Ministry of the Family. The GOV has drawn up aset of policies and actions to be undertaken (SocialSectors Action Program), which, together with the projectcomponents to be financed, will effectively implement itsbasic objectives and strategy for the social sectors.

The project would support: (a) rehabilitation anddevelopment of the primary health care network, includingprovision of basic health and nutrition services forpregnant and nursing women and children under six yearsof age; (b) development and expansion of pre-schooleducation, focused on the lower-income urban and ruralareas; (c) information, education and communicationsservices for health, nutrition, and education promotion;and (d) improvement of the GOV's capacity to design, planand implement social programs and to monitor the effectof such programs. A technical coordinating officeattached to the MINFAM would liaise with implementingagencies on project planning, budgeting, and

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implementation. Autonomous agencies attached to the MOEand MOH would be in charge of day to day administrationof the project; technical supervision would be carriedout by regular ministry staff. Special attention wouldbe given to strengthening implementation and coordinationcapacity in the various institutions involved.

IaMg1t8: The proposed project would help cushion the negativeeffects of adjustment for the moot vulnerable groups,while at the same time improving the efficiency ofresource use and the capacity to design, implement, andmonitor social programs. It would have direct effects onthe nutritional status of pregnant and lactating women,infants and pre-school children; and would provideimproved associated services such as priLaary health careand pre-school education. It would suppport the GOV'sstrong commitment to poverty alleviation. By 1995, theproposed project would: increase health and nutritionservice coverage from about 200,000 to 420,000 pregnantwomen, from about 80,000 to 360,000 post-natal women,from 245,000 to 640,000 infants under two years of age,and from 370,000 to 916,000 children between two and sixyears of age; expand coverage of formal and informalpreschool education by about 116,000 children from poorand disadvantaged families; improve administrativeregisters for health and education; establish amanagement information system for the social sectors; andconduct periodic household surveys to monitor the impactof social programs. The project would benefit women,especially poor women, in Venezuela. Towards projectcompletion, about 400,000 pregnant and 360,000 lactatingwomen (about 50X of pregnant and lactating women) wouldhave access to primary health care and nutritionservices. This includes not only pre-natal and post-natal care, but also food distribution, nutritionalcounseling, health education, medical services forwomen's reproductive care, early cervical and breastcancer detection, and family planning. In addition, theexpansion of the community day-care centers and pre-school system in the poor and marginal areas would notonly give girls from poor families better opportunitiesfor improved school achievement, after an adequate headstart, but would also allow women to pursue additionalopportunities for productive employment.

Rl8ks: The main risk derives from the lack of experience of thegovernment in preparing and executing social sector projectswith external financing, especially from the Bank. Theimplementing ministries do not have project staff familiarwith international procurement of goods, works, orconsultants, or, more generally, with Bank guidelines.Since this would be the first Bank investment project inVenezuela after a long hiatus, domestic implementation

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capacity needs to be strengthened. The project wouldprovide training and technical assistance for theimplementing agencies. A country assessment of localprocurement practices has been completed, and a procurementseminar would be conducted for project staff. Frequent andintense supervision would be undertaken. A project-launchworkshop to cover implementational aspects such as Bankprocedures, procurement, and disbursement mechanisms, wouldtake place soon after loan effectiveness.

Estimated Costs: A/ Local Foreign total- - - - US$ million - - - -

Primary health care 125.0 60.5 185.5Pre-school development 31.6 10.9 42.5Information, education, communications 4.4 8.2 12.6Institutionai development 2.2 1.6 3.8

Total Base Costs 163.2 81.2 244.4

Physical contingencies 8.0 4.2 12.2Price contingencies 50.0 14.3 64.3

Total project costs 221.2 99.7 320.9

L/ Excluding taxes and duties, which are negligible.

~inaning Plan:Local Foreig Total- - - - - US$ million - - - -

Government of Venezuela 220.9 - 220.9Proposed IBRD loan 0.3 99.7 100.0

Total 221.2 99.7 320.9

Estimated IBRD Disbursemen:

Bank fiscal Year19291 192 1993 1994 1995 1996 1297---------------------- US$ million --------------------

Annual 6.1 12.3 18.2 20.5 20.4 18.1 4.4Cumulative 6.1 18.4 36.6 57.1 77.5 95.6 100.0

Rate of Return: Not applicable

Du: IBRD No. 20575

SOCIAL DEVELCPMNT I'ROJIggT

I. INTRODUCTION

1.1 Fueled by exploitation of its abundant petroleum resources,Venezuela's society and economy underwent rapid transformation during the post-war ieriod. Population increased from 4.2 million in 1945 to 18.7 million in1988, due to high natural population increase and substantial immigration. Urbanpopulation rose from 35 percent to 87 percent of the total, reflecting afundamental change in the social composition. Income per capita tripled, fromabout US$1,000 to over US$3,200. However, Venezuela's non-petroleum-basedsectors developed behind high protective tariffs and restrictions on competition,which left them ill-equipped to compete externally or to ntilize resourcesefficiently. Venezuela has remained dependent on petroleum, which, until the1986 fall in prices, provided 95 percent of its export earnings, and its economyis still highly vulnerable to swings in the petroleum markets.

1.2 Venezuela, however, has been unable to adequately address theproblems of poverty, and has yet to develoi effective policies and services inthe social sectors. Social indicators in Venezuela are relatively poor for acountry at its level of per capita income (US$3,230 per capita in 1988), withrates of infant mortality (36 per thousand), child death rate (five perthousand), and deaths due to parasites (8.2 percent) all high when compared toother middle-income countries; while life expectancy (70 years), access to healthservices (73 percent of the population), and net secondary-school enrollment (38percent), are comparatively low, with respect to other middle-income countries(Annex 1).

1.3 Venezuela has a highly skewed income distribution and significantpoverty. The incidence and severity of poverty increased significantly in therecent past, due to three major factors: first, government programs have beenpoorly managed and have not been targeted to those most in need. Second,Venezuela's rapid urbanization, and especially the growth of metropolitan Caracas(now with an estimated population of over four million, which representsapproximately 21 percent of the country's population), has severely strained thegovernment's capacity to provide services, leading to the development of largeslum communities with only limited basic services. And third, although the rateof population growth has declined (from 3.4 percent: a year in the 1970s to about2.7 percent at present), it is still high for a country with GNP per capita inexcess of US$3,000. Recent estimates indicate that about 22.3 percent of thepopulation live at or below a commonly accepted line of extreme poverty (para.2.2). Reports also indicate a deterioration in the nutritional status of thepopulation, mostly in poorer areas, and affecting especially the most vulnerablegroups: infants, pregnant and nursing mothers, and children under six years ofage. Despite high expenditures, social programs have typically attempted to

cover the entire population, mainly through general food subsidies largelybenefiting those grouaps with enough purchasing power to acquire the bulk of thesubsidized products. In 1988, these subsidies represented about Bs 15 billion(1.6 percent of GDP), and almost 90 percent of total public spending onnutrition, but approximately 60 percent of subsidized goods were consumed bymiddle and high-income families.

1.4 In the medium to long term, Venezuela's development prospects aregood. Venezuela has only begun to exploit the potential offered by its richnatural resources (not only petroleum, but also hydroelectric potential, naturalgas, iron ore, bauxite, gold and land resources). Divorsified growth is possiblein many sectors, with excellent prospects for exports given Venezuela's locationand its strong comparative advantage in terms of energy-internive activities.The Government of Venezuela (GOV) has set out to redefine the role of the statethrough a radical, but long overdue, economic reform and restructuring program.The essential aim is to reduce the elaborate regulatory framework and complex andcostly subsidies which pervade the economy and, simultaneously, to encourageprivate sector activity and investment through trade reforms, financial sectorreforms, the establishment of a favorable investment climate, and theestablishment of integrated and well-targeted social programs.

1.5 The GOV has reconfirmed its commitment to the central objectives ofits adjustment programs, despite the recent sharp inciaase in the internationaloil price, which will have a positive impact on the fiscal and external accountsof Venezuela. The GOV considers the increase temporary and is setting up a fundto save a substantial part of the windfall and to smooth out governmentexpenditures over time.

1.6 The Bank's Structural Adjustment Loan (SAL) and Trade Policy Loan,approved by the Board in June 1989, directly support the GOV's economic reformprogram described above. The-s were the fi-st two Bank loans for Venezuela since1974, and represent the start of a new assistance program. Three 'Loans wereapproved in FY90: a Financial Sector Loan, a Public Enterprise Reform Loan and aTechnical Assistance for Preinvestment Loan. The reform measures will, ofnecessity, imply large shifts of real income among the various groups of society.This is necessary if the economy is to be put on a path of sustainable growth,but there plainly will be significant transitional social costs. Thecontractionary policies followed by the GOV during the stabilization period willbring dislocations in various economic activities and increased unemployment.The impact is likely to be most severe on the poorest groups. For this reason,the government's efforts to redefine and redirect indirect food subsidies tobenefit lower-income groups, and to expand targeted social programs which benefitthe most vulnerable groups of the society, are essential elements of thestructural adjustment program. The Bank supported the GOV's initial povertyalleviation steps under the SAL, in which successful implementation of the 1989social program, and an appropriate social program and associated funding for 1990were conditions for release of the second tranche. Indirect subsidies werespecifically converted into targeted social programs, such as community day-carecenters and programs operating through health clinics in the poorest areas of thecountry. The proposed project would build upon these achievements, to helpshield the poorer segments of Venezuelan society from excessive adverse effectsof the reform effort and to overcome past deficiencies in targeting, coverage,and administration of selected social services.

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II. THE SOCIAL SECTORS

A. Background

2.1 Currently, the GOV faces a major challenge: that of undertakingimportant economic and social adjustments while protecting the most vulnerablesocial groups. Over the last decades, significant progress has been achieved inimproving the living conditions of the population, especially in the areas ofed,ication, health and nutrition. School enrollments increased rapidly: some8S oercent of children aged seven to 12 are enrolled in primary education and2,. oercent of the 19-24 year old population attend universities. Nev secondaryscho.Nl enrollment ratios, however, are only 38 percent. Male and femaleenrollment rates are not significantly different. The illiteracy rate, which was37 percent 25 years ago, dropped to 9.5 percent in 1989, and still remains higherfor women (11 percent) than for men over 15 years of age (eight percent). Theinfant mortality rate fell froe 6- per thousand in 1965 to 36 per thousand in1988. Life expectancy, which was around 63 years i-. ')65, now reaches 70 years.However, these indicators lag behind those of other Latin American countries withlower income levels (para. 1.2 and Annex 1).

2.2 The incidence and severity of poverty increased significantly inVenezuela during the 1980s. Official documents clearly indicate a worsening ofmany social indicators. They report an increase in the proportion of familiesliving in extreme povertX (with incomes below the level required to purchase abasket of food items to satisfy minimum food requirements) from 10.3 percent in1982 to 22.3 percent in 1989, and an increase in the proportion of familiesliving in critical poverty (with incomes above the cost of minimum foodrequirements but less than twice that amount -- est3mated at about Bs 500 permonth in 1987) from 22.0 to 31.4 percent between 1982 and 1989. In the educationsector, repetition rates incrc sed fourfold and the attendance rate fell from 94to 91 percent between 1983 and 1986; the proport!jn of a given cohort reachingthe sixth grade also fell from 64 to 58 percent between 1978 and 1985. In thehealth sector, there is evidence that the proportion of malnourished childrenrose from 14.0 to 15.3 percent between 1982 and 1989, and that the proportion ofthe population with caloric deficiency rose from seven to 23 percent over thesame period. The infant mortality rate has stagnated, while the rate associatedwith certain diseases linked to poverty (malnutrition, gastrointestinal diseases)has increased. Although there is little information about malnourished pregnantwomen, the prevalence of anemia in mothers is over 20 percent, and the percent oflow birth weight is about nine percent. The number of communities with gravesanitary deficiencies also increased rapidly In recent years. The GOV is awarethat public social spending is concentrated on inefficient programs (such ashigher education and curative medicine); is overly centralized, with littlecommunity imvolvement; and that there is a lack of effective planning,coordination, monitoring and evaluation.

2.3 The institutional organization of the social sectors is complex. Anumber of institutions may commonly share responsibilities in the implementationof a given social program. Most of these institutions are public, although theparticipation of the private sector in health and education is far fromnegligible.

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2.4 Edugtion. The education sector constitutes by far the largest shareof public social spending in Venezuela (an average of about five percent of GDPfrom 1973 to 1985). Most of this funding (80 percent) comes from the CentralGovernment, with the remainder covered by local governments, municipalities, andadministrative entities. While real spending on education nearly doubled between1973 and 1985, per capita spending actually fell about 4.5 percent over theperiod.

2.5 Public education in Venezuela is free at all levels, and the mainprovider of educational services in Venezuela is the Ministry of Education (MOE).The MOE not only plays a role as direct provider of elementary, secon'.ary,special and adult education, but is also responsible for planning and budgetingfor the sector, and for overseeing both public and private educationalinstitutions. The MOE directly administers 58 percent of total publicexpenditures in education (Annex 2); while higher-education institutionsadminister 28 percent and autonomous institutions around ten percent. Theremainder is investment expenditure undertaken directly by the Ministry of UrbanDevelopment (MINDUR).

2.6 The allocation of public funds among the different levels ofeducation is skewed in favor of higher education, which receives about 35 percentof the MOE budget, while primary education gets 25 percent, and secondary andadult education receive about seven percent. The rest, about one third of theMOE budget, goes to support, planning and administration activities.

2.7 In 1988, some six million students attended schrAl or university inVenezuela, about half of them being in the first six grade- of primary education.Enrollment at the pre-school level is low (33 percent of the corresponding agegroup) and universal access to the first grade of primary education has not yetbeen achieved.

2.8 The GOV intends to achieve a rapid increase in the enrollment rate atthe pre-school level, given that an expansion of pre-school educational programstargeted to the poorest children can help comiensate for academic deprivations inthe home environment. The expansion will cover both conventional and non-conventional pre-school m3des. Conventional pre-school education implies regularclassroom attendance by children to recei-i formal pedagogical classes Siven by aprofessional teacher. Non-conventional pre-school education doesn't necessarilyimply regular classroom attendance by children. A teacher and communitypromoters share teaching duties, providing not only instruction, but also areassuch as health and nutrition, recreation, and child development. Experience inVenezuela has been mostly with the conventional mode, but the GOV expects thatnon-conventional modes will become increasingly important in the medium term.

2.9 In designing the expansion of pre-school coverage, the GOV will limitpublic funding exclus'-vely to schools aimed at low-income families in the pooresturban and rural areas (defined in accordance with the country's Poverty Map);while expansion of coverage for students from middle and higher-income householdswill be undertaken exclusively by the private sector. Community participationwill be encouraged for school construction and repairs, and NGOs will expandtheir participation, especially in non-conventional pre-school modes.

2.10 The private sector has significant involvement at all levels ofeducation, covering 16 percent of pre-school enrollments, 12 percent of primaryschool enrollments, 22 percent of secondary school enrollments and 19 percent of

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higher-educatlon enrollments. It employs about 18 percent of teachers and runs15 percent of educational institutions. Its relative participation has beenincreasing over recent years at the level of pre-school and primary educationand, more significantly, at the level of higher education. Non-GovernmentalOrganizations (NGOs), especially the Bernard van Leer Foundation, are activelyinvolved in pre-school education.

2.11 Health. Health services in Venezuela are likewise provided by bothpublic and private institutions. The major public institutions in the healthsector are: the Ministry of Health (MOH) and the Venezuelan Social SecurityInstitute (IVSS). Most public health services are under the directresponsibility of the central government. The MOH is financed from the nationalbudget and serves, in principle, the entire population. The IVSS is financedwith contributions from workers, enterprises and the State, and its beneficiariesare salaried employees and their families. Private health services haveexperienced rapid growth. Over the last twenty years, the number of privatehospitals has doubled; by 1986, almost one fourth of all hospital beds werelocated in private institutions. In 1986, there were 229 public hospitals (with36,500 beds) and 305 private hospitals (with 10,900 beds).

2.12 The organization and delivery of public health services is organizedin a myriad of operationally independent institutions. The two most importantinstitutions in terms of population and geographical coverage, the MOH and theIVSS (para. 2.11) administer about 73 percent of the public health budget(Annex 2), with the MOH administering about 52 percent, and the IVSS about21 percent. The rest (23 percent) is administered by various autonomousinstitutions ' and by MINDUR (four percent).

2.13 In 1987, a law creating the National Health System was enacted. Thatlaw gives the MOH power to coordinate the delivery activities of the differentinstitutions involved. However, at this time, the National Health System hasbeen implemented, as a pilot test of the system, only in one of the states of thecountry.

2.14 Regarding infrastructure, MINDUR is responsible for building newhospitals and general health infrastructure. However, there is no formalcoordination between MOH and MINDUR, so infrastructure construction does notnecessarily follow MOH's plans for health services delivery. The Foundation forthe Maintenance of Public Health Infrastructure (FIMA) is in charge of providingequipment, maintenance, and repairs to the existing hospital infrastructure.

1 There is a network of autonomous institutions dedicated to thedelivery of health and health-releted services. These include: (a) theNational Institute for Geriatrics and Gerontology (INAGER), an institution toprovide social protection, health services, and medical attention to theelderly; (b) the National Institute of Hygiene (INH), which provides generallaboratory services to the system; (c) the National Institute of Nutrition(INN), described in paras. 2.19 and 2.21; (d) the Central Office for theNational Health System (OCPSS), an administrative office in charge of studiesneeded to implement the National Health System; (e) the Foundation for theMaintenance of Public Health Infrastructure (FIMA), to provide equipment,maintenance and repairs to the existing hospital infrastructure; and (f) theCaracas University Hospital Institute (IAHUC), a hospital with importantresearch activities, located within the Central University of Venezuela.

2.15 Public health administration is highly centralized. The MOH and IVSSboth operate with planning, budgeting, appointments and programming decided inCaracas. As a consequence, management at the departmental and district levels isweak and services provided at that level tend to be inefficient. At the sametime, in urban areas, duplication of services is common. Management problems axcompounded by the lack of adequate management-information systems.

2.16 Preventive health is the responsibility of the MOH, which handles anetwork of about 3,500 urban and rural health facilities, spread throughout thecountry (Annex 1, Table 4), of which about 955 are located in poor urban andrural areas. The facilities include 68 regional and district hospitals;480 urban health centers, and 2,954 rural health centers. Health centers are runby physicians and nurses, except in the case of Type I rural health centers,which only have auxiliary nurses.

2.17 Primary health care services in Venezuela are coordinated by theMOH's General Directorate-Health Sector (Direcci6n General Sectorial de Salud),comprising five departments: maternal-child health, oncology, medical care,epidemiology and health promotion. Representatives from each of thesedepartments participate in the Permanent Primary Health Care Commission (CPAPS),which meets weekly to coordinate primary health care activities.

2.18 The Maternal-Child Health Program encompasses the following: (a)infant and child health, which includes monitoring of growth and development,immunizations, diarrheal control, control of acute respiratory infections,nutritional supplements, students' health, and breast-feeding; and (b) maternalhealth and family planning, which provides obstetrical and gynecological care(pregnancy care, delivery and neo-natal care, using risk criteria), with specialemphasis on pre-natal care, detection of gynecological and breast cancer,prevention of sexually transmitted diseases, and contraceptive information andservices.

2.19 For pregnant women and infants, attention at health centers iscombined with the distribution of nutritional supplements, the composition anddelivery of which are the responsibility of the National Institute of Nutrition(INN). Infrastructure and staffing are generally adequate. However. operationalsupport has been poor, and coverage has been relatively low. .n 1988, about25 percent of pregnant women received prenatal care in public health centers;five percent received post-natal care; the program covered 16 percent of infantsunder two years of age and ten percent of children from two to six years o2 age.

2.20 Child Care. The Fundaci6n del Nitfo, a private foundation, hasresponsibility for several programs directed towards children under six years ofage, from low-income families. The main program, Community Child-Care Centers(Hogares de Cuidado Diario), combines supplementary feeding with community-basedday care for young children with working mothers, living in poor neighborhoods.The program was initiated in 1974, and at present there are about 3,000 homes(covering some 15,000 children). A rapid expansion of coverage is planned forthe next few years.

2.21 Nutrition. The National Institute of Nutrition (INN) is in charge ofmeasuring the extent of malnutrition in the country, defining norms forrequirements and necessary supplements, and buying and distributing these foodsupplements. It collaborates with the MOE for school feeding programs, with theMOH for the nutritional component of maternal and child health-care programs, and

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with the Funwaci6n del Nito for nutritional advice and training to women incharge of community child-care homes. The GOV is in the process of redefiningthe role of the INN, away from food purchasing and distribution, in favor of amore normative role. The INN will divest service delivery, and remain in chargeof policy and norm setting, quality control, coordination and testing.

2.22 Poverty Alleviation. A Presidential Committee for PovertyAlleviation (Comisi6n Presidencial para el Enfrentamiento a la Pobreza -- COPEP)was recently created to address the problem of poverty alleviation. It is formedby members of the ministries and institutes involved in the social sectors, aswell as in national planning (Ministry of Agriculture, MOE, MOH, Ministry of theFamily (MINFAM), CORDIPLAN, and the INN) with a leading role attributed to theMTNFAM. The MINFAM has been entrusted with coordinating the planning, design,development and monitoring of social prograns among implementing agencies such asthe NOE and the MOH. COPEP's role is to analyze the poverty s'cuation in thecountry and to design an action plan directed towards the poorest social groupsand areas; and focusing, within these, on the most vulnerable household members.The Venezuelan Fund for Social Investment (FONVIS), which is an autonomousinstitution attached to the MINFAM, is responsible for obtaining andadministering funds for social-sector projects, including health, education,nutrition, housing, and employment from international financial institutions.

2.23 Several institutions are responsible for the gathering of relevantinformation on social sectors and the evaluation of social problems: the MOH forvital statistics, the INN for an information system for nutritional surveillance(SISVAN), the Central Office of Statistics and Information (OCEI) for householdsurxveys, and other institutes, such as FUNDACREDESA, for research. By far, themost important is OCEI, which carries out periodic surveys based on large samplesof the population. Up to now, it has mostly focused its attention on employmentbut has the potential, through the design of appropriate questionnaires, togather useful information for the evaluation of social issues and policies.

B. Issues in the Social Sectors

2.24 The basic issues in the social sectors include:

(a) increased incidence and severity of poverty;

(b) stagnation of social indicators in spite of substantial publicspending;

(c) low coverage of several basic social programs; and

(d) financing issues.

2.25 Increased Incidence and Severity of Poverty. Although theVenezuelan economy modernized rapidly after the Second World War, driven by thehigh revenues generated by the petroleum sector, a significant proportion of thepopulation continues to live in poverty. The worsening of economic performanceover the last decade aggravated average living conditions, and the number ofextremely poor families increased by at least 50 percent. By 1989, about half

the number of families in the country had less than twice the income needed toacquire the minimum food basket; and 15 percent of all households were not evenable to meet their food needs. In general, these families have a very low levelof education and suffer from nutritional deficiencies (mainly caloric) andunsatisfactory housing and sanitary conditions. They live throughout thenational territory, both in urban and rural areas. The problem is more acute inthe West-Central and Andean regions, in the North-East, and the South(Territories) as well as in the slums surrounding Caracas (Annex 3).

2.26 Stagnation of Social Indicators in SRite of Substantial PublicSpending. Venezuela has devoted a large share of resources to the social sectorscompared to other middle-income economies (in the eighties, an average of about40 percent of central government budget and between 11 and 14 percent of GDP).Social per-capita expenditures in education, health and nutrition have beenhigher than in other countries (such as Chile or Costa Rica) during the pastdecade. In spite of this significant financial effort, less has been achievedthan in Latin American countries with much lower per-capita incomes. Forexample, gains in terms of school enrollment rates have been larger in Chile andMexico; while progress in lowering the infant mortality and fertility rates andincreasing life expectancy have been more impressive in Chile and Costa Rica(Annex 1). The design of new social programs and policies should considerefficiency gains as a priority objective.2

2.27 Low Coverage of Several Basic Social Programs. Basic social programssuch as pre-school and primary education, preventive medicine, nutrition,attention to young children under six, and pregnant and lactating women, havesuffered from insufficient resources and/or ineffective implementation by theministries or agencies concerned. The lack of evaluation, insufficient datagathering and analysis, and little coordination among the different institutionsinvolved have also prevented a better awareness of the problems and the searchfor improvement.

2.28 The pre-school enrollment rate is only 33 percent overall, and it ismuch lower for children from poor families. Over 75 percent of children frompoor families do not have access to this type of education. In primaryeducation, the enrollment rate is around 85 percent, but both the quality ofeducation (repetition rates of about 23 percent in the first grade) and the rateof attendance (high drop-out rates of around seven percent) are low. Theseproblems mostly affect children from poor households. There is also limitedcapacity to respond to increasing demand.

2.29 The coverage of Maternal and Child Health Care programs by the MOH isrelatively low (para. 2.19). The total fertility rate of 3.8 is higher than incountries with comparable levels of per-capita income. Vaccination coverage is,except in the case of polio, less than half the average observed for the wholeLatin American region. Only about 25 percent of all pregnant women receivehealth care in public health centers. The number of consultations in preventivemedicine is also low, since demand is biased towards curative medicine ana this

2 Due to the paucity and unreliability of the information available,there is a substantial margin of error in the social indicators themselves;and these tend to vary according to source. Some indicators are not evenknown, such as the contraceptive prevalence rate, as no survey has beencarried out since the 1977 World Fertility Survey.

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bias has increased over recent years. As a consequence, several healthindicators such as infant and neo-natal mortality rates, and morbidity rates dueto malaria, have worsened.

2.30 Nutritional deficiencies are a result not only of the level anddistribution of income, and relative prices, but are also a consequence of theinefficiency and mistargeting of government policies. The main policy instrumentused in the past was general food subsidies. These often leaked to middle andupper-income families, representing about 20 percent of the population, whoconsumed at least 60 percent of the subsidized goods. The subsidies were also,to a large extent, applied to nutritionally inappropriate products such ascoffee. As a consequence, less than 18 percent of the total expenses contributedto their stated purpose. The GOV has begun to take important steps to replacethese subsidies by better targeted programs; it has introduced or expandeddirectly targeted programs such as the Beca Alimentaria, Hogares de CuidadoDiario, and nutritional interventions through the primary health-care network(Annex 4).

2.31 Financing Issues. The total amount of public social spending inVenezuela is substantial compared to other middle-income economies. In 1985,health and education expenditures were 8.6 percent of GDP and about 30 percent oftotal government budget (Annex 2). The share of education is the largest: about21 percent of total government budget, and about six percent of GDP. As afraction of CDP, these expenditures are similar to those in Chile or Costa Ricaand much higher than educational expenditures in Mexico, Brazil or Korea.Expenditures in health represent about 2.6 percent of GDP, which is similar towhat is spent in Chile or Brazil. Even though there were periodic cutbacks inpublic expenditure since the onset of economic crisis in the late 1970s, theshare of public spending in the social sectors in Venezuela increased moderately.

2.32 One possible explanation for the continued increase in publicspending in education and health during the period of economic downturn is thatthe payroll component accounts for a very large share (between 50 and 75 percent)of total expenditures in these two sectors. Available evidence suggests that theincrease in the share of the wages and salaries component occurred at the expenseof complementary inputs such as textbooks, fuel, vehicles, medical equipment andsupplies, which have been systematically under-funded in recent years.

2.33 Despite substantial effort, misallocation of social spendingconstrains further development of the social sectors. In the education sector,35 percent of total spending goes to higher education, which represents 7.5percent of total enrollment; while pre-school and primary education receive 41percent of total resources, and cover 77 percent of total enrollment. Efficiencygains could be obtained by redistributing resources towards pre-sch-'.,l andprimary education. The health sector is strongly biased towards the least cost-effective ways of reducing mortality: spending on curative medicine represents 85percent of total spending in health and the recent cuts in spending mostlyaffected programs in preventive medicine. The amount of resources devoted todirect food transfer programs is very limited (less than Bs 2 billion in 1988).Since the lower levels of education as well as preventive and primary health careyield higher social returns, these are the most obvious public goods componentswithin overall education and health services. These are also the sub-sectorswhere substantial improvement would be directly translated into better socialindicators. It will be therefore necessary to increase the allocation ofresources to the neglected areas and reverse past trends. As a first step in

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that direction, the GOV has reallocated the funds saved through the removal ofdifferent food and input subsidies towards targeted social programs, increasingthe shares of primary health care and pre-school and primary education In theirrespective ministerial budgets (Annex 5).

2.34 Further development of the social sectors is also limited byfinancial constraints. In the past, the expansion of the social sectorsbenefitted from the large oil revenues: in the 1970s, social spending inVenezuela increased at a very fast rate (by 80 percent in real terms between 1973and 1977). When economic conditions worsened, a clear effort was made to lessenthe impact of the crisis on the social sectors: total real spending remainedpractically constant. Per capita real spending, however, decreased by 15 percentbetween 1977 and 1985. Financial constraints are becoming more stringent, nowthat major macroeconomic imbalances need to be corrected.

C. Government Strategv

2.35 In early 1989, the GOV undertook a far-reaching economic reformprogram. It includes a fundamental reform of the exchange and trade systems, aliberalization of price controls, a de-regulation of the financial system, andsignificant improvements in fiscal operations. These measures are necessary ifthe economy is to be put on a path of sustainable growth, but there will plainlybe transitional costs which will have important social consequences. For thisreason, the GOV's efforts to eliminate general food subsidies, redirect them tobenefit lower-income groups and enlarge ard expand targeted social programs whichbenefit the most vulnerable groups of society are essential elements of thestructural adjustment program.

2.36 The GOV's social-sectors strategy is expressed in the Poverty-Alleviation Plan prepared by the COPEP in 1989. Its aim is to reverse pastpoverty trends through strengthening the supply of social services (health,nutrition, education and housing); improving the targeting of actions towards themost vulnerable groups and areas; and increasing the role of the private sectorthrough community involvement. The MINFAM has the leading role in coordinating,developing, and monitoring these efforts. The plan focuses on: the real incomeof poor families; living conditions in poor urban neighborhoods; and nutritionand maternal-child health care. In May 1989, under the structural adjustmentprogram supported by the Bank, the GOV eliminated all indirect food subsidies,which accounted for almost two percent of GDP in 1988. The GOV dropped thesesubsidies completely, and utilized the resources instead for direct transferprograms, focused mostly on nutrition, for specific targeted groups, to preventfurther deterioration in the real income of poor families.

2.37 To improve living conditions in poor urban neighborhoods, the GOVrecognizes the need to increase the coverage of social services. Expendituresfor repairs and/or new construction of schools and health centers will betargeted towards the poorest areas. Credit will be provided to improve housingconditions in some 400,000 dwellings (approximately one third of those located inmarginal urban areas). The construction of 200 new community centers (inaddition to the existing 200) is also planned. These centers will be used forseveral purposes, such as health and educational services, child day-careservices, and commmnity meetings.

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2.38 To carry out its objectives in the area of nutrition and matenal-child health care, the GOV has prepared detailed programs to:

(a) increase the coverage and improve the targeting of maternal-childhealth care programs;

(b) increase the coverage of community child day-care programs;

(c) increase pre-school enrollments and introduce nutrition programs atthat level of education; and

(d) improve the efficiency of school-feeding programs at tht level ofprimary education.

2.39 For the Maternal-Child Health-Care Progrm, the GOV intends toincrease coverage to about 1.3 million children under six years of age and tonearly 600,000 pregnant and nursing women, providing additional consultations andfood supplements to the poorest third of thi3 populatior.. Initially, allpregnant and nursing women and children seeking preventive health care atselected health centers will be entitled to receive food and nutrition education.As demand for preventive health services stabilizes, food distribution will belimited to those persons which fulfill economic, biological or nutritional riskcriteria. The program intends to increase significantly the number of annualconsultations and the distribution of food (mainly milk, pre-cooked flour andsoy-based nutritional supplements). No significant capital investment will benecessary as the existing physical infrastructure appears satisfactory.Increasing the amount of food transfer as well as solving the problems ofirregular food distribution are necessary conditions for success. The GOV willrely heavily on the private sector and community organization for fooddistribution.

2.40 The GOV recognizes the need to expand the community-based child dav-care _roeram which, besides providing day care for children from working women inpoor areas, releases mothers for income-generating activities and has anutritional component. It also has the advantage of promoting communityinvolvement and of being highly complementary with the maternal-child healthprogram described above. Although initiated in 1974, the program has very lowcoverage: some 70,000 children are served while the number of children aged lessthan seven and belonging to poor households amounts to nearly 1.3 million, ofwhich approximately 600,000 live under very poor conditions. The GOV has set anambitious target: to increase the number of community day care centers from theexisting 3,000 to 42,000 by 1993, so as to reach around half a million childrenfrom poor families. The objective is to provide better care to poor childrenwith working mothers and to reduce the nutritional deficiencies existing in thepopulation under seven years of age. To reach this objective, an increasingnumber of women will have to be selected and trained as caretakers in eachcommunity; then, each of them will receive a small monthly payment per child fromthe GOV (about Bs. 1,200 per month), supplemented by monthly user fees paid byparents (Bs. 300 per month per child), to buy food and prepare meals according tonorms set up by the INN. Supervision will be undertaken by the MINFAM and theFundaci6n del Niuio.

2.41 To increase the attention provided to pre-school children, the GOValso plans to increase pre-school enrollments and to introduce school-feedingprograms at that level of education. This should have a positive impact on the

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quality of primary education and contribute to improved nutritional status. Theobjective is to increase enrollment to reach approximately half of the childrenfour to six years of age. Reaching this objective will require significantinvestment in infrastructure. Public funds will be assigned exclusively toincreasing enrollments for pre-school children in the poorest areas, whileincreased coverage of middle and upper income families will depend on the privatesector. The GOV is also examining possibilities to make use of existingcommunity centers, to facilitate a fast expansion of coverage. NGOs such as theBernard van Leer Foundation, the "Centros del Nitio y la Familia" of theMetropolitan University, and the Fundaci6n Ror Trujillo, as well as CESAP (Centroal Servicio de la Acci6n PoRular) are actively participating in these activities,and will be encouraged to maintain and expand their participation.

2.42 The GOV is conducting an evaluation of the existing school-feedinaDrogram. which is currently functioning at the level of primary education (firstsix grades), in order to decide whether school-feeding programs should becontinued or phased out. If continued, then adequate targeting criteria wouldneed to be designed.

2.43 To satisfy urgent nutritional needs and to compensate for the effectsof recent economic policy changes on the prices of various food products, the GOVhas set up a new program of nutritional grants (Beca Alimentaria), which benefitschildren in the first six grades of primary education, in poor urban and ruralareas. The program consists in a monthly transfer of Bs 500 per month to themother of each qualifying child. The selection of schools is made on the basisof poverty maps which identify low-income areas. Approximately 1.7 millionchildren are now benefitting from these transfers which started in November 1989.The GOV has extended the nutritional grants to cover the 1990-91 school year,while an evaluation of the program., which was supported under the SAL, isundertaken. After the evaluation is completed, a decision will be taken whetherthis program would be phased out in favor of direct food transfers, as wasoriginally Intended.

D. Bank_ Rle and StrateRv

2.44 In 1989, the Bank's lending program to Venezuela was resumed, after a15 year hiatus, and agreements were reached between the Bank and the GOV onmacro-economic management, financial-sector reforms, and social programs. Giventhat the stabilization and adjustment programs could potentially have an adverseimpact on the real living standards of the poorest segments of the population,the GOV has prepared a Social Sectors Action Program (Annex 5) which constitutesthe basic policy framework which is being supported by the proposed project.

2.45 The Bank intends to assist the GOV to cushion the poor from theeffects of adjustment, and to improve the efficiency and equity of socialprograms. Past and current sector work has made clear how serious social issuesare in Venezuela, given that the incidence and severity of poverty increasedsignificantly over recent years, and that the relatively modest performance interms of social welfare does not stem from lack of overall social spending butrather from inefficiency and mistargeting. Several crucial areas have beenneglected: preventive health care, pre-school and primary education, andnutritional needs of the lower income groups; while a large proportion of public

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social spending has ultimately benefitted middle and high-income groups.Cons'.derable room for improvement exists without excessive financial strain, butthis implies reversing past trends, improving implementation capacity, andstrictly monitoring the impact of social programs.

2.46 Venezuela has no recent experience with externally financed projectsin the social sectors. The SAL and Trade Policy Loan, approved in June 1989, arethe first Bank loans to Venezuela since 1974 and represent the start of a newmulti-sectoral lending program, to support structural adjustment through economicand sector work as well as lending. ThM Technical Assistance for PreinvestmentLoan, designed to strengthen the GOV's capacity to select, prepare and implementsound investment projects and to build up a pipeline of projects (includinghealth and education) suitable for financing by the Bank during the next fiveyears was approved in FY90, together with a Financial Sector Loan and a PublicEnterprise Reform Loan. A Public Sector Investment Review, which covers capitaland recurrent expenditures in the social sectors, has recently been undertaken,and a Public Administration Study and a Poverty Study will be completed in FY91.The results of these studies will assist in the identification of issues,policies and investment needs in the social sectors, and strengthen Bank-GOVdialogue on issues such as civil service salaries.

E. Rationale for Bank Involvement

2.47 Bank strategy aims to support the GOV's efforts to shift the economyfrom one based on the consumption of oil rents to one based on growth inproductive activities, focusing on four main areas: (a) reform of basic economicpolicies; (b) redtuction of the external debt overhang; (c) improvement of theefficiency and strengthening of the institutional capacity of the public sector;and (d) development of the physical and social infrastructure. In support of theadjustment process, the Bank's strategy for the social sectors in Venezuela aimsinitially to assist the GOV in its poverty alleviation efforts by expandingcoverage of targeted social programs, while improving institutional capacity andthe efficiency and equity of such programs. In the longer term, this strategywill encompass essential decentralization of responsibilities for programimplementation, and establishment of managerial information and monitoringsystems for decision-makers; and will continue to focus on improved allocation ofresources within sectoral expenditure programs. The FY89 UNDP Report on PublicPolicy Options for Venezuela identified major issues that are being addressed bythe proposed project. Further recommendations for sectoral reforms will emergefrom ongoing sector work on poverty, public sector investment, And the healthsector, and planned work on the education sector. The results of this work willbe reflected in future lending operations in health and education. The Bank,under the SAL, has provided technical ass4 stance for the design of the new socialprograms. The proposed project will support the first stage of implementation ofselected social programs of high priority.

2.48 Despite the recent oil-price increases, the proposed operationcontinues to be of high priority, since (a) it would assist the GOV in sustainingappropriate targeting of social expenditures to poor and vulnerable groups at atime when such targeting could be put at risk; (b) the price increases areexpected to be temporary; and (c) the GOV is setting up a fund to save a maj40rpart of the windfall and to smooth out GOV expenditures over time (para. 1.5).

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III. TiE FRDJECT

A. ObQectives

3.1 The objective of the proposed project is to assist the GOV indeveloping a social sector strategy to redirect its social expenditures intowell-targeted and efficient programs, within the framework of the Social SectorsAction Program (para. 3.3 and Annex 5), by financing high priority activities.It aims to:

(a) improve basic health, nutrition, and education services for alarge and poor segment of the population, especially pregnant andlactating women and children under six years of age, whilemitigating the potential adverse impact of the adjustment program;

(b) replace indirect subsidies with targeted social programs, whileimproving their efficiency and rationalizing their distribution;and,

(c) promote institutional development by improving the planning andmanagement capacity in the MOE and MOH, as well as the capacity totarget, develop and monitor social programs in the MINFAM.

B. Policy Framework

3.2 In support of its social sectors strategy, the GOV has establishedthe Presidential Commission for Poverty Alleviation (COPEP), to plan, execute andmonitor social services for the poor. The MINFAM, which serves as theSecretariat for COPEP, is being reorganized into the Ministry of SocialDevelopment, with staff in adequate numbers and with appropriate qualificationsto fulfill its responsibility for planning, designing and coordinating publicsocial programs in Venezuela. Social programs, however, would continue to beexecuted by the implementing agencies such as the M4inistries of Health andEducation and the Fundaci6n del Niuo. The social sectors strategy aims toimprove the efficiency in the use of scarce resources, by concentrating publicresources in direct assistance programs targeted to the most vulnerable groups,introducing user fees where appropriate, and improving the efficiency ofgovernment institutions and their actions and interventions in the socialsectors.

Social Sectors Action Projram

3.3 The GOV and the Bank have agraed on a set of policies and actions(listed in the GOV's Social Sectors Action Program reproduced in Annex 5) to beundertaken by the GOV which, together with the components financed by theproposed project, would effectively implement the strategy described above(para. 3.2). The GOV has sent a letter to the Bank confirming the Social SectorsAction Program which was agreed at negotiations (para. 6.3). The Social Sectors

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Action Program includes, among other items, the programs and financial andmanagement policies to be undertaken by the GOV during the project implementationperiod, as described below.

3.4 Social ProgXams. The GOV has extended its commitment toagreements reached under the Bank's Structural Adjustment Loan on rour socialprograms:

(a) Nutritional Grant (Beca Alimentaria). The grant consists of adirect transfer of Bs 500 per month to the mothers of needy schoolchildren, up to the sixth grade of primary school. Participatingschools were identified through the national poverty map asserving marginal (urban or rural) areas. The program wasinitiated in November 1989, and the MOE is at present providinggrants to about 1.7 million children. An evaluation of theprogram is underway, but preliminary findings indicate that theprogram has been well targeted to the poorest areas of the countryand has contributed to increased school attendance. The GOV'sevaluation, which includes the targeting and effectiveness of theprogram, the amounts of the grants, and a comparison of itseffectiveness to that of other education interventions, would becompleted by August 31, 1991. The program, which is entirelyfinanced with GOV funds, would continue to be implemented for atleast an additional year (to cover the 1990/91 school year);

(b) Maternal-Child Health Care (Salud Materno-Infantil). The programaims at expanded coverage and improved health care services forthe most vulnerable groups, particularly women and children.Services would be improved by following the primary health carestrategy, which is managed by the Directorate General-HealthSector (KOH), with the support of the CPAPS (para 2.17). Thenutritional component of the program was initiated inDecember 1989, with UNICEF assistance, covering ten health centersin the state of Trujillo. The PAMI Foundation (para. 3.15-3.16),an autonomous unit attached to the KOH, established in March 1990,would contract for food procurement and distribution. The GOVplans to gradually expand coverage throughout the nationalterritory, starting with 15 states by March 31, 1991; and reachingthe 23 states by Decemtber 31, 1991;

(c) School Feeding Pxogram (Programa de Alimentacifn Escolar). TheGOV is preparing a proposal for a school feeding program for needyprimary school students, which would carefully evaluate theviability of consolidating existing programs and the cost-effectiveness and feasibility of supporting a school feedingstrategy. The proposal would be completed and sent to the Bank byJune 30, 1991, and, if viable, an agreed program would begin to beimplemented during the 1991-92 school year; and

(d) Community Day-Care Centers (Hogares de Cuidado Diario - HCD).This program combines the goals of day-care for poor children,supplemental feeding, and community education and development. Italso gives poor women additional opportunities for income-generating activities, by guaranteeing adequate low-cost day carefor their children during working hours. Community mothers, in

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their own homes, provide day care for siX to eight young children.The GOV provides a loan to equip the homes for day care, donatestoys and other necessary materials, and provides a monthly stipendto the day-care provider. This is supplemen'ed by fees paid byparents of the children who are being cared for in the center.Direct implementation of the program is beirg transferred to theFundacion del Niffo and other NGOs; and 2,000 centers were openedduring the last quarter of 1989. The GOV would continue toprovide adequate budget and priority to the program, and wouldopen centers according to an agreed timetable. The target for1990 is 7,700 new centers; and for 1991, 10,800 new centers. Allthese centers would be entirely financed with GOV funds. Anevaluation of the HCD program would be completed by August 31,1991 and the GOV would begin to implement agreed actions byOctober 31, 1991.

3.5 Financial and Management Policies. These provisions include:

(a) Strengthening primary health care by DroRosing an increase in therelative budgetary share of the first two levels of health caredellver, measured in accordance with a methodology agreed withthe Bank. The MOH would propose to the appropriate budgetaryauthorities that this share out of the MOH budget be increasedfrom 33 percent in 1990 to 36 percent in 1991 and 40 percent in1992;

(b) Reorganizing the MINFAM into the Ministry of Social Development,so as to establish adequate implementation arrangements for socialprograms; and

(c) Conducting studies to enhance planning and management capacity atthe MOH, MOE and MINFAM, to be completed by March 31, 1992. Agreedactions would begin to be implemented by August 31, 1992.

3.6 Assurances were received at negotiations that review of theachievements in implementation of the Social Sectors Action Program (Annex 5),and of budget proposals for social programs would be conducted before December 1each year, starting in 1991 (para. 6.2). The timing and phasing of the socialsector policies and actions may be modified if agreed by the government and theBank during the annual reviews. If a situation arises which makes it improbablethat the Social Sectors Action Program, or a significant part thereof, will becarried out, the Bank will be entitled to suspend disbursements on the proposedproject, either partially or totally (para. 6.2).

C. Project Components

Primarv Health Care (US$242.6 million, including contingencies)

3.7 The proposed project would support the strengthening of theDrimair health care network, increasing primary health care coverage andnutritional interventions for the most vulnerable groups. This requires both

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improving the delivery of basic health care and incorporating the distribution offood to the pregnant and lactating women and children under six years of ageattending health centers from poor rural and marginal urban areas selected toparticipate in the program. Distribution of powdered whole milk, vitamins,minerals, and other supplements through the health centers would therefore be anintegral part of the routine provision oi medical check-ups and immunizations forwomen and children receiving medical attention in those selected health centers.A food-stamp program was considered, instead of direct food distribution, butfound not to be viable at this time. Targeting of primary health-care andnutrition activities would be accoriing to the concept of risk. The main risksto be considereL include: nutritional risk (underweight pregnant women, low birthweight infants, and undernourished children up to six years of age); obstetricalrisk; and reproductive risk.

3.8 The proposed project would support preventive and curativeinterventions for women's reproductive health, the health of infants and youngchildren, and nutrition and health education. The main activities for womeninclude: pre-natal and post-natal care; detection and early care of cervical anduterine cancer, breast cancer and sexually transmitted diseases; and familyplanning services. For infants and children, services include: preventive infantcare; immunizations; and treatment of acute diarrheic illness and acuterespiratory infections. Nutritional assistance would be given to pregnant andlactating women; to children up to six years of age (especially to undernourishedchildren). Education and training activities, especially promotion of breast-feeding, would also be undertaken. Information, education and communications(IEC) activities would be carried out at three levels: health service personnel,local communities, and the general public. The Directorate General-Health Sector(MOH) is responsible for implementing the primary health care strategy, with thesupport of the CPAPS. The CPAPS would have a crucial support role in thetechnical design and coordination of these activities.

3.9 The norms for delivering primary health-care, particularly withrespect to pre- and post-natal care and the application of risk indicators, wouldbe improved. Pregnant women would receive four pre-natal medical checkups.Women with pregnancies classified as high-risk (about 30X of pregnant women)would receive seven medical checkups, and be referred, as necessary, to healthfacilities at the tertiary level. Post-natal women would receive one medicalcheckup, and emphasis would be given to encouraging the practice ofbreastfeeding, and providing information and services regarding family planning,as required. Children under two years of age would receive four medical checkupsper year (six if classified as high-risk). Children between two and six years ofage would receive two medical checkups per year (four if classified as high-risk). For all groups, nurses would be responsible for periodic checkups in-between or following medical appointments.

3.10 The nutritional component would have an impact on the nutritionalstatus of pregnant and lactating women, and children under six years of age. Inorder to assure appropriate attention is given to this issue, an KOH nutritionistwill participate in the CPAPS (para. 2.17). As the program is graduallyexpanded, the regional or district nutritionist would help train the health teamsof all selected health centers. Afterwards, this nutritionist would beresponsible for nutritional supervision of those health centers under theprogram. Health-center staff would be trained in measuring weight and height ofprogram beneficiaries with special emphasis on the identification and care of

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under-nourished children. The INN will have a normative role at the nationallevel, and will be responsible for nutritional surveillance.

3.11 Information on the nutritional status of each child under theprogram will be kept and monitored at the health centers. The information wouldthen be aggregated at the health center, district, and state level; to obtaindetailed information on the nutritional status of the country. This would allow(a) prioritizing resource allocation towards those states or districts withgreatest nutritional needs; and (b) measuring the impact of the program onparticipants from a nutritional status baseline.

3.12 The program would provide a nutritional supplement free of chargeto the target population through selected health centers. This would attract themost vulnerable groups to health posts for medical care and eventually improvetheir nutritional status. Children up to six years of age with malnutritionwould receive three kg. of powdered whole milk per month, while children withoutnutrition problems are provided two kg. of powdered whole milk per month.Pregnant and lactating women would receive two kg. of powdered whole milk permonth, while those identified as at risk would receive three kg. of powderedwhole milk per month. Vitamin supplements and iron would also be provided topregnant and lactating women. Although food distribution is centered onvulnerable individuals, rather than families, the amount of food to bedistributed per beneficiary is similar to successful programs in other countriessuch as Chile, which have been successful in reducing infant and childmalnutrition, as well as the proportion of low birth-weight infants. AlthoughVenezuelan women already place a high value on breastfeeding, efforts would bemade to minimize the potential for a decline in breastfeeding vhen lactatingmothers receive milk supplements by emphasizing breastfeeding in the information,education, and communications campaigns through mass media and communityeducation and participation. The project would finance a small pilot study toreplace milk distribution with alternative food packages of at least equal valuefor women with infants under six months of age.

3.13 The program would be expanded nationwide during the first twoproject years, during which health centers, rather than individuals, would beselected to be included in the program, based on socioeconomic criteria. Allpregnant and lactating women and children under six years of age receiving healthcare in those centers would be entitled to food supplements. " L dAstribution,however, would be of a transitional nature: as the economy improas. it wouldprogressively be limited to those individuals with biological and nutritionalrisk, receiving care in the targeted health centers. Special attention would begiven to the need to minimize potential disruptions by establishing clearentitlement criteria and procedures for the transitional phase. By 1995, theproposed project would support increasing basic health and nutrition servicecoverage in public health centers from 200,000 to 420,000 pregnant women for pre-natal care (from 25X to 501 of pregnant women) from 80,000 to 360,000 women forpost-natal care (from 5X to 50X of post-partum women); from 245,000 to 640,000infants under two years of age for preventive health care (from 161 to 501 ofinfants under two years of age), and from 370,000 to 916,000 children between twoand six years of age for preventive health care (from 101 to 301 of the agegroup).

3.14 The proposed project would finance medical equipment for maternaland child hiealth to replace obsolete a:d non-functioning equipment at about 955

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primary health care centers in poor rural and urban areas (to cover the poorestcommunities, defined according to the country's Poverty Map); vehicles forprogram supervision; computing equipment; and office, printing and laboratoryequipment for the health care network. Whe. necessary, food storage areaswithin the health centers would be reconditioned, rehabilitated, or constructed.The proposed project would strengthen the health teams through trainin- andtechnical assisrance. It would also support the development of an informationsystem that would facilitate monitoring and evaluation.

3.15 Food distri.bution would be managed by the PAMI (Programa AmpliadoMaterno-Infantil) Foundation, an autonomous entity attached to the MOH, createdspecifically to administer the distribution of foodstuffs to health centers ineach region, through contracts with private firms. The PAMI Foundation reportsdirectly to the Vice-Minister of Health (Chart 1), and is managed by a Board ofDirectors comprised of representatives of the MOH, MOE, MINFAN, INN, CORDIPLANand OCEI. Management of the primary health care strategy would remain theresponsibility of the Directorate General-Health Sector (MOH), with the supportof the CPAPS.

3.16 PAMI has alreadv designted, planned and initiated a basic healthcare and nutrition program, in Bocon6, in the state of Trujillo, in December1989. Implementation has been very successful, and target group demand fornutritional services and health care at the ten health centers involved increasedfourfold. Two months after program initiation, about 5,000 patients per monthwere being cared for at the ten health centers involved. This experience isbeing used for streamlining program design and distribution channels as coverageis progressively extended.

Pre-School Development (US$57.6 million, including contingencies)

3.17 The highest priorities in investing in basic education are (a) toprovide access to school to all school-age children; and (b) to increase thelearning achievement of children, so that those who enroll actually complete theprimary cycle. Research and practices have shown that investment, both publicand private, in pre-schools targeted at the disadvantaged is an effective way ofincreasing students' learning capacity, given that children's capacity forlearning is conditioned by their health and nutritional status and by their priorlearning.

3.18 The proposed project would improve the health and nutritionalstatus of children from low-income households through support for thestrengthening of primary health care (paras. 3.7-3.16). It would also coverdeficits in cognitive development for children in poor and marginal areas of thecountry, who are likely to be unexposed to learning materials prior to enteringprimary school.

3.19 In designing the expansion of pre-school education coverage, theGOV has agreed that public funding for expanding pre-school coverage will be

sSee *Policies for Improving the Effectiveness of PrimaryEducation in Developing Countries", Education and Employment Division, WorldBank, February 20, 1990.

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exclusively spent on schools aimed at low-income families (para. 2.9). Theschools to be built or expanded during the first year of the project have beenidentified in the poorest areas of the country, based on the poverty map, and oninformation received from regional or local MOE offices. Construction plans foreach year of the project would be based on the same criteria, and would bediscussed at the annual project reviews. Community garticioation would beencouraged for school construction and repairs, and NGOs would expand theirparticipation, especially in non-conventional pre-school modes. The relativeparticipation of conventional and non-conventional modes (para. 2.8) in pre-school expansion would be agreed annually with the Bank.

3.20 The pre-school expansion program would be managed by the Fundaci6nPREESCOLAR, an autonomous institution linked to the Ministry of Education,expressly created for this purpose. This would allow for streamlining localprocurement for civil works, while normative and sectoral planning functionswould continue to be the responsibility of MOE staff. The Fundaci6n PREESCOLARwould be in charge of the day to day management of the project, and would beheaded by an administrative director, with a team of four or five officials, withthe necessary secretarial support (Chart 3).

3.21 The main objective of the pre-school development component is toincrease coverage for the population between four and six years of age from thelowest socio-economic groups, and thus to improve care and developmentalprospects for this especially vulnerable segment of the population. The proposedproject would support the design and construction of pre-primary schools (forchildren up to six years of age), as well as the provision of furniture andinstructional materials, teacher and staff training, and supervision for theseinstitutions. This support includ.s: (a) an expansion of coverage of theconventional pre-school education system, expanding enrollments by about 96,000in five years, focusing such expansion on marginal areas, both urban and rural;and (b) an expansion of the non-conventional pre-school education system,increasing e.rollments by about 16,000 children over the next five years. About1,600 classrooms would be built under the project for the conventional pre-schoolsystem; about 185 non-conventional pre-school centers would also be constructedunder the project. These figures are merely indicative, however, since therelative expansion of the conventional and non-conventional pre-school networkswould be discussed and agreed annually with the Bank (Annex 5). Criteria for theidentification of conventional and non-conventional pre-primary se'hools to besupported under the project, including the use of communities and NGOs have beenagreed with the Bank. The school construction program for the first year of theproject has been agreed. School construction plans for each subsequent projectyear would be discussed with the Bank and agreed at the annual project reviews(para 6.2). The GOV, through adequate arrangements, would seek the cooperationof the communities and NGOs in the construction and upgrading of health centerfood storage areas and of pre-primary schools.

3.22 Under the conventional system, the location of the new pre-primaryschools to be constructed would be carefully selected according to the socio-economic status of the families living in the arer. Under the non-conventionalsystem, centers operated by NGOs (para. 2.10) would be supported by the proposedproject. Schools to be renovated or constructed during 1991 have beenidentified, and all have adequate available sites. The GOV and the Bank wouldagree on annual sub-programs during the annual reviews. The expansion of thenon-conventional system would reach about ten states over the five-year period.During negotiations, assurances were obtained that the GOV would retain

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engineers, or an engineering firm to supervise civil works, starting with thefirst year of construction, by July 1, 1991 (para. 6.2).

Information. Education and Communications (IEC' (US$15.8 million, includingcontingencies)

3.23 The proposed project would support the development of acomprehensive and innovative IEC program. The IEC program would be based on theuse of mass media, community participation and inter-personal communication. TheIEC activities would be designed to: (a) increase public awareness and knowledgeof health, nutrition and education principles, and support project activities;(b) foster community education and participation through the aid of public andprivate sector entities; (c) support the training modules for health-servicestaff and participating communities through the development of audio-visual andprinted materials; and (d) promote the distribution and delivery of specificservices and products based on social marketing concepts.

3.24 An IEC technical group, consisting of an IEC manager and threespecialists, would be contracted under the project to coordinate media andmaterials production, community-related research and training. The Office ofTechnical Coordination (OTC) in the MINFAN (paras. 3.40-3.43) would beresponsible for ensuring communications and coordination across agencies and forinvolving key technical personnel (nutrition, immunization, family planning,etc.) in the design of IEC strategies and programs. The OTC would managetechnical assistance contracts with individual consultants and public and privatesector organizations, including services in community education andparticipation. The OTC would be responsible for the production of mass mediaprograms, and the provision of technical assistance, including services for thepreparation of educational material and for their dissemination throughtelevision, radio, and other media. The OTC would also acquire equipment andmaterials required for this component, and would coordinate all training ofproject-related staff.

3.25 In the absence of sufficient data to design a comprehensive, long-term strategy for the IEC program, the IEC component is divided into two phases.The first phase would focus on increasing public awareness and knowledge of basichealth, nutrition and education during the first 12 months. Emphasis would be onthe use of mass media (TV, radio, press) to promote "Ten Basic Health Messages."Because these messages have been used successfully internationally, only minoradaptations are needed prior to production. The OTC would thus contract anadvertising agency to develop, transmit and monitor the media campaign for the'Ten Basic Health Messages."

3.26 The preparatory stage for the second phase would be carried outconcomitantly with phase one. The objective is to complete a series of tasksessential for developing effective IEC strategies and programs for the remainingyears of the project. The tasks, which would be coordinated by the OTC, include:

(a) an assessment of the scope and capabilities of the media andpublic and private communications organizations and companies, aswell as non-governmental organizations working at the communitylevel;

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(b) an analysis of program documents, reports, policies, surveys andother sources of information on basic health-care and nutritionservice delivery in order to identify issues and problems to beaddressed through specific IEC activities;

(c) formative research--i.e., qualitative, client-oriented studies,using techniques such as surveys, key informant interviews,ethnographic reporting, participant observation and focussed groupdiscussions;

(d) design of communications strategies for health and nutrition(maternal-child health, immunization, oral rehydration therapy,family planning and nutritioT), as well as education, includingmedia plans, contents and messages, channels of communication, andmonitoring and evaluation systems;

(e) production of materials to support the mass media, communityparticipation and inter-personal communication activities,including product design, pre-testing, revision, and distribution;and,

(f) development of the management tools to monitor implementation ofIEC activities and campaigns and to evaluate achievement and cost-effectiveness of program objectives.

3.27 The MINFAM would also enter into co-production arrangements with mediaorganizations for the creation of programs to promote health, nutrition andeducation messages. The opportunities for co-production include buying rightsfor a television program such as Sesame Street; assisting in the design of healthand education-related contents in soap operas (for example: breastfeeding, familyplanning, AIDS prevention, women's social roles and status); and providingcontent for news programs, social documentaries and current affairs.Satisfactory contractual arrangements for securing the rights necessary for anyprograms to be co-produced with mass-media organizations would condition thedisbursement of the corresponding funds (para. 6.5).

3.28 The proposed project would rely on the experience and lessonslearned in the design, implementation and evaluation of IEC activities in healthand nutrition projects in other countries. The emphasis would be on sustainedefforts to change behavior, rather than on a series of isolated, sporadiccampaigns. The training would focus on improving the technical skills ofpersonnel in the respective ministries and on motivating community participation.The development of counselling skills for health personnel in the health centerswould be a high priority. The use of mass media would not only serve to educatethe public but to reinforce the training of personnel--i.e., provide continuingeducation. Special TV programs would be designed to produce educational videosfor use in training personnel and educating the public in health centers, as wellas other community settings. Community organization activities would beundertaken both by the staff in health centers and by public and privateorganizations working at the community level.

3.29 The proposed project would support the contracting of fixed-term staffin the IEC technical group and the costs associated with managing the IECcomponent (such as travel, supervision, materials and supplies). The project

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would finance research and special studies, principally through contracts withlocal universities and national and international consultants and firms. Theproject would support training activities to be carried out by the implementingagencies, NGOs, universities, etc., as well as the development and production ofprinted and audiovisual materials. The project would finance the servicescontracted to develop and conduct the mass media campaigns, as well as innovativeactivities, including the buying of TV rights for programs such as Sesame Street.

Institutional Development (US$4.9 million, including contingencies)

3.30 The proposed project would finance administrative costs of theproject management units at OTC, PAMI, and PREESCOLAR, including financing forconsumable materials, consultants, equipment (including computers), and operatingcosts.

3.31 The proposed project would also finance special studies, whichwould be coordinated by the OTC, in collaboration with MOH and MOE. The studiesare designed to: enhance the social sector data base, and thereby policyformulation and planning; evaluate the impact of selected project activities;improve the planning and management of the three implementing agencies; andimprove the delivery of maternal and child health-care services and the extensionof pre-school programs. Terms cf reference for these studies were discussed andagreed at negotiations (para. 6.1). The studies, which are described below,include general social sector studies, health sector studies, and educationsector studies.

3.32 General Social Sector Studies. These include the following:

(a) ongoing analysis of the effects of demographic changes (mor-ality,fertility, migration) on social sector development plans ain'policies, with the first study to be completed by December 31,1991;

(b) study on the sources and uses of financing the social sectors,with special emphasis on the MOH, MOE, and MINFAM, to be completedby March 31, 1992;

(c) studies to enhance the planning and management capacity of theKOH, MOE and MINFAM, to be prepared by each ministry by March 31,1992; and,

(d) evaluation of the impact and cost effectiveness of the IECcomponent, particularly community education and participation.This evaluation would be continued throughout the life of theproject, with oversight from a special advisory committee.

3.33 Health Sector Studies. These include the following:

(a) evaluation of the impact of the PAMI-managed component on selectedmaternal and child health indicato._s. This evaluation would becomean on-going exercise, with the first report prepared by December31, 1991;

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(b) study on the alternatives for increasing the efficiency of healthcare delivery, especially at the primary and secondary levels ofhealth care. The study would be completed by December 31, 1992;

(c) study to design an action plan to attract and retain qualifiedstaff for the first two levels of health-care service. The studywould be completed by March 31, 1992; and,

(d) testing and implementation of techniques and criteria tostrengthen interventions targeted for the most vulnerable groupsof women and children, particularly nutrition, immunization,prevention and control of infectious diseases, early detection andtreatment of cervical and breast cancer, classification accordingto obstetrical risk and reproductive risk criteria. The screeningand referral systems to be developed and implemented would bederived from a series of sub-studies.

3.34 Education Sector Studies. These include the following:

(a) study to determine the optimum, viable profile of a specialistresponsible for integrating activities (health, nutrition,education, community education) at the pre-school level. The studywould be completed by March 31, 1992;

(b) study on the methodologies to be applied in targeting and locatingnew pre-school centers. The study would be completed by June 30,1991;

(c) study on the identification, evaluation and possible selection ofNGOs to participate in the expansion of the non-conventionalmodality for pre-school education. The first stage of the studywould be completed by May 31, 1991; the second stage, by October30, 1991; and the study would be finalized by April 30, 1992; and

(d) a series of case studies at the local school level to identify thekey variables which affect management efficiency and the qualityof instruction. The studies would be completed by December 1,1992.

3.35 The proposed project would cover the costs of social programimplementation and impact monitoring. Effective monitoring is critical to theoverall management of the government's social programs. An inter-winisterialagreement was signed by the Ministers of the Family, Health, Education and OCEIin March 1990, to cover improvements in administrative registers; managementinformation systems, and surveys of living conditions.

3.36 Periodic Household Surveys (Encuesta Ampliada de Hogares -- EAH).An enhanced system of monitoring social conditions, based on an approachdeveloped in the World Bank under its Living Standards Measurement Survey (LSMS)program, which would be built upon OCEI's Household Survey for data collection,processing and analysis, would be used. These surveys would continuously yieldmulti-variate household information, at a level of geographical disaggregationconvenient for decision-making. The EAH would be a modified version of theexisting houisehold survey, incorporating new modules, with variables in thefields of health (including women's reproductive health, children's health,

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breastfeeding, and fertility), education, income and expenditures,anthropometrics, etc. OCEI would coordinate survey implementation with otheragencies, and would be responsible for field work and data processing. Resultswould be analyzed, on a regular basis, by working groups with members from thoseinstitutions in charge of formulating and/or implementing social policies andprograms, as well as from research institutes.

3.37 Administrative Registers. This component would also deal with theproblem of inadequate basic information by improving the quality of recordkeeping (including not only service delivery but also administrative andfinancial information) and the reporting system from the local, to the state andto the central level. The proposed project would support (a) coordinating,within the MINFAM, MOE and MOH, those units responsible for data collection; (b)analyzing the registers themselves and (c) analyzing data processing mechanisms.Working groups within each agency would e'valuate the statistical data processedin the agency, and propose a mechanism for restructuring administrativeprocedures for data collection and processing.

3.38 The project would support the carrying out and analysis of surveysduring the project period, including equipment, technical assistance, training,materials and operational costs.

D. Project ImDlementation and Management

3.39 Implementation Schedule. The proposed project would beimplemented over a period of approximately five and a half years, and is expectedto be completed by June 30, 1996. The closing date would be December 31, 1996.The cost schedules prepared for the various components (Annex 6) andimplementation schedule (Annex 7) would serve as a basis for projectimplementation planning and would be updated annually by the MINFAM, MOE, MOH andOCEI, in preparation for the annual reviews. During the annual reviews with thegovernment (paras. 3.6, 3.45 and 3.46), the Bank would give particular attentionto the effectiveness and efficiency of implementation of project components aswell as of the Social Sectors Action Program, and changes would be agreed asneeded.

3.40 Project Management. The organization and management of theproposed project has been designed to: (a) reinforce the government entities andoffices, namely COPEP, FONVIS (para. 2.22) and OTC (para. 3.41-3.43), responsiblefor developing, financing and coordinating poverty alleviation programs; (b)facilitate the integrated planning and coordination of social sector activitiesand programs, both public and private; (c) institute a management informationsystem to evaluate the implementation and impact of social sector programs andaid in decision-making at the operational and policy-making levels; and (d)develop a comprehensive IEC program, based on the use of mass media, communityparticipation and inter-personal communication, to promote and strengthen primaryhealth care.

3.41 The three implementing agencies, the MINFAM, MOH and MOE,particip^te in COPEP. The NINFAM is secretariat of COPEP and responsible forsocial sector analysis and policy formulation, intersectoral planning and

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coordination, monitoring and evaluation of programs and projects, andadministration of international financing in the social sectors. In addition toits own staff, the MINFAM has two important instrumentalities to help carry outits mandate: FONVIS, a financial management agent of MINFAM (para. 2.22), whichis responsible for managing social investment funds obtained throughinternational loans and grants; and OTC, which is responsible for coordinatingtechnical matters and managing specially-funded projects. With respect to theproposed project, the MINFAM would have responsibility for interacting with theBank and overseeing project implementation through the OTC.

3.42 MINFAM would manage the Bank funds, including transfers to theimplementing agencies in accordance with approved plans and needs, and accountfor their use through financial and audit reports. OTC would have severalfunctions: (a) liaison with the MOH and MOE and the Project Management Units(PHUs) of their respective foundations (PAMI and PREESCOLAR); (b) intersectoralcoordination of project planning, implementation, monitoring and reporting; (c)management of the collaborative efforts between OCEI and the MINFAM, MOH and MOEto evaluate the impact of social sector programs and to develop effectiveoperational management tools; (d) contracting of technical assistance, services,studies, and training; (e) management of the IEC component, including thecontracting of services with public and private sector entities; (f) overallmanagement of procurement under the project, with responsibility for all ICB; and(g) management of the project resources targeted for the primary health careactivities to be implemented by the Directorate General-Health sector (MOH), withthe support of the CPAPS. The key staff in the OTC include: the general managerand the managers of administration aud finance; health; and IEC (Chart 4).Evidence of adequate arrangements, satisfactory to the Bank, for the carrying outof the respective components of the project (including the transfer of loanfunds) with PAMI and PREESCOLAR will be a condition of effectiveness (para. 6.4).

3.43 In addition to the project management unit (PMU) in the OTC, theGovernment would establish PMUs in PAMI and PREESCOLAR. The PMU in PAMI would beresponsible for dealing with the procurement, distribution, and control ofpowdered whole milk, vitamins, minerals, and other nutritional supplements forthe selected health centers, as well as the construction and refurbishing of foodstorage areas. The key staff for PAMI include the executive director and themanagers of administration and technical coordination (Chart 2). The PMU inPREESCOLAR would manage the pre-school development component. The key staff ofPREESCOLAR include the general manager and the managers of programming,coordination and evaluation, as well as of management and implementation (Chart3). OTC would manage the primary health and IEC components (para. 3.42).

3.44 The PMWs would be headed by an administrative director and carry outprimarily administrative functions. The units would be responsible for civilworks, procurement, technical assistance, finance and reporting, and generaladministrative support. Staff working in the PMUs would be hired under fixed-term appointments, exclusively for the performance of project-related duties.Project units would thus be able to recruit and retain staff, since they are notsubject to standard civil service regulations. During negotiations, the GOVconfirmed training plans agreed during appraisal and provided evidence that thestaffing plans for the project units attached to the MINFAM, MOE and MOH havebeen approved (para. 6.1). Project directors for these units have beenappointed. Evidence of appointment of key staff will be a condition ofeffectiveness (para. 6.4). The government will inform the Bank in writing whenthese staff have been appointed.

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3.45 Annual Reviews. Annual reviews would be conducted jointly by theBank and the GOV, covering both the Social Sectors Action Program and theimplementation of project components. The annual reviews would constitute anessential instrument in the process of social program planning andimplementation, and would be a key monitoring tool for the proposed project. Thereviews would cover annual sub-programs, including targets for the socialprograms for the upcoming year, discuss proposed budget allocations, and reviewthe achievements obtained during the past year (Annex 5). Key indicators ofproject implementation, to be used during the annual reviews, are given in Annex8.

3.46 During negotiations, assurances were received that the governmentwould conduct joint annual reviews with the Bank, covering overall social programpolicies and actions for the past year, and schedules of program and projectcomponent implementation for the following year, including budgetary allocations,following criteria acceptable to the Bank (para. 6.2). Agreement has beenreached on the progress review criteria which would govern such reviews duringthe project implementation period.

IV. PROJECT COSTS _ FINANCING. PROCURMMENT AND DISBURSEMENTS

Costs

4.1 Total project costs are estimated at about US$320.9 millionequivalent, excluding taxes and duties. Tables 4.1 and 4.2 summarize theestimated costs by project component and category of expenditure. Detailed costsare presented in the tables of Annex 6.

4.2 Base Costs and Contingencies. Base costs are expressed in May1990 prices, and exclude taxes and duties, which are negligible. Civil workscosts were based on estimated unit costs for the type of buildings proposed forthe various components. Furniture costs were based on lists of standard locallyavailable items. Equipment costs were based on prices for similar imported orlocally available items. Overseas and domestic training and costs of foreign andlocal consultants were based on current standards. Operating costs were based oncurrent estimates of salaries and operating requirements. Total contingencies ofUS$76.5 million represent 31.31 of base costs. Physical contingencies(US$12.2 million) represent 5X of base costs; price contingencies(US$64.3 million), about 26X of base costs, were estimated on the basis of theimplementation schedule (Annex 7) and expected annual price increases as follows:local -- 30X for 1990, 171 for 1991, and 10 for subsequent years; foreign --3.61 for 1990-95. The exchange rate estimates for the end of each calendar yearwere as follows: Bs 54.5 for 1990; Bs 62.2 for 1991; Bs 65.7 for 1992; Bs 68.6for 1993; Bs 72.0 for 1994 and Bs 76.5 for 1995.

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Iable 4.1: SUMMARY OF PROJECT COSTS BY COMPONENT LA

% TotalForeign Base

Local Foreign Total Exchange Cost(US$ million)

Primary health care 125.0 60.5 185.5 32.6 75.9

Pre-School development 31.6 10.9 42.5 25.6 17.4

Information, education, communications 4.4 8.2 12.6 65.1 5.2

Institutional development 2.2 1 6 3.8 42.1 1.5

TOTAL BASE COSTS 163.2 81.2 244.4 33.2 100.0

Physical contingencies 8.0 4.2 12.2Price contingencies 50.0 14.3 64.3

TOTAL PROJECT COSTS 221.2 99.7 320.9

/a Net of taxes and duties, which are negligible.

4.3 Foreign Exchange Costs. Direct and indirect foreign exchangecosts are estimated at about US$99.7 million equivalent including contingencies.Based on a detailed analysis of expenditures of similar projects in the region,the foreign exchange component for the major categories was estimated as follows:(a) furniture and civil works, 42%; (b) construction materials, 31%(c) equipment, 90%; (d) food, 20%; (e) foreign consultants, 100%; (f) overseastraining, 1001; (g) domestic training, 10%; (h) instructional materials, 27%;(i) operating costs, 15X; (j) consumable materials, 18%; (k) technical assistanceand studies, 50X; and (1) IEC (information, education, and communications)services 75X.

Financing

4.4 To meet a part of the total estimated project costs of aboutUS$320.9 million, the Bank would make a loan of USSlOO.0 million eauivalent(31.21 of total estimated cost). The financing plan and loan allocations bycategory of expenditure are presented in Table 4.3. Venezuelan counterpartfunding requirements would be met by the government. The Bank share of projectcost financing is lower than 501 due to the large (56%) share of food in totalproject costs, which is totally financed with GOV funds, due to its recurrentnature.

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Tabke A,1 SUMMARY OF PROJECT COSTS BY CATEGORY OF EXPENDITURE

Z X TotalForeign Base

Local Poreign Total Exchange Costs(US$ million)

Furniture 1.0 0.7 1.7 41.2 0.7Construction materials 2.4 1.1 3.5 31.4 1.4Civil works 7.3 5.4 12.7 42.5 5.2Equipment 3.2 29.0 32.2 90.1 12.5Food 114.5 28.6 143.1 20.0 55.7Foreign consultants 0.0 0.7 0.7 100.0 0.3Technical assistance & studies 2.5 2.4 4.9 49.0 2.0Training 6.1 1.5 7.6 19.7 3.0Instructional materials 1.1 0.4 1.5 26.7 0.6IEC services 2.5 7.3 9.8 74.5 4.0Operating costs 20.8 3.7 24.5 15.1 1.3Consumable materials 1.8 0.4 2.2 18.2 ALI

Total base costs 163.2 81.2 244.4 33.2 100.0

Physical contingencies 8.0 4.2 12.2 34.4Price contingencies 50.0 14.3 64.3 22.2

Total 221.2 99.7 320.9 31.1

4.5 Recurrent Costs. Additional annual recurrent expendituresgenerated when the program is in full operation are estimated at about US$40million (including contingencies). Recurrent expenditures would consistmainly of food purchasing and distribution (US$30 million); and teachinghonoraria, salaries and other operating costs of the pre-school developmentcomponent (US$10 million). Expenditures on food would be financed entirelyfrom the GOV budget throughout the life of the project; consumable materialsand operating costs would be financed by the Bank at decreasing rates (90% forthe first US$4.0 million of expenditures; 60X from US$4.0 million to US$10.0million; and 301 thereafter (if the Bank agrees to reallocate proceeds of theloan to this category). However, no withdrawal will be made for recurrentcosts in respect of expenditures incurred after December 31, 1994. The Bankshare of financing of recurrent costs would be relatively high at the start ofthe project in recognition of GOV's 1001 financing of the recurrent costs offood distribution, and to allow for an adjustment period to introducebudgetary increases to cover incremental recurrent costs other than food.Most of these funds would be used to provide operating costs, includinghonoraria for teachers and promoters, for the pre-school developmentcomponent. Health service coverage increases would rely mostly on efficiencyimprovements, using existing infrastructure and health center personnel,thereby incurring only marginal incremental recurrent costs. By 1988, the GOVwas spending Bs 14.8 billion (US$400 million) annually in general foodsubsidies (2% of GDP). General food subsidies have been eliminated, and

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would be used to finance directly targeted social programs. including thosewmder the proposed project. These funds would suffice to cover the estimatedrecurrent expenditures on the proposed project and other programs such as thenutritional grants and community day-care centers without constituting anunreasonable addition to the government's budget.

tble 4.3: FINANCING PLAN(US$ million)

ProposedgQyrnment IBRD Loan Total IARD (X)

Civil works 2.1 15.0 17.1 90Equipment, furniture, andconstruction materials 4.6 39.0 43.6 00

Food 191.6 0.0 191.6 0Consulting services & studies 0.0 7.1 7.1 100Training 0.0 10.3 10.3 100Operating costs 20.6 13.6 34.2 40Instructional materials 0.2 1.8 2.0 90Consumable materials 1.8 1.2 3.0 40IEC services 0.0 12.0 -12.0 10

TOTAL 220.9 100.0 320.9 31.2

fgocurement

4.6 The government would follow Bank procurement guidelines andprocedures for the proposed project. Cost of civil works under the project(about US$17.1 million, including contingencies) would involve refurbishingand construction to pre-primary schools, construction of new pre-primaryschools, and repairs and additions to health centers for food warehousing anddistribution. Contracts for works would be awarded according to localcompetitive bidding (LCB) procedures acceptable to the Bank and which wouldallow foreign bidders to participate. Works would be packaged in regionalcontracts, and to the extent practicable would be grouped in bid packagesestimated to cost more than US$100,000 equivalent each. About 25-30 suchcontracts are expected throughout project life. Because of the dispersed andremote location of pre-primary schools and health facilities to be built orupgraded, and average expected contract amounts below US$1 million, interestfrom foreign bidders is very unlikely. Works )stimated to cost up toUS$25,000 equivalent may be executed by force account of the executing agencyor procured under contracts awarded on the basis of comparison of at leastthree price quotations in accordance with procedures satisfactory to the Bankand aggregating to no more than US$200,000. The GOV would employ engineers orengineering firms to supervise civil works under the project (para. 3.22).The government has provided evidence that sites for all civil works to beundertaken during the first 24 months of the project are ready and availablefor building (para. 6.1).

- 31 -

4.7 The total cost of aeqipment (including vehicles) is estimatedat about US$37.4 million, including contingencies, of which about 80X would beprocured through international competitive bidding (ICB) procedures, inaccordance with Bank guidelines, and the remainder through LCB or localshopping (by inviting at least three quotations). Contracts in excess ofUS$200,000 would be awarded on the basis of ICB. Where ICB procedures areused, goods manufactured locally would be given a preference margin of 15.Contracts estimated to cost the equivalent of US$200,000 or less, but morethan the equivalent of US$25,000, up to an aggregate amount equivalent toUS$5.2 million, may be awarded in accordance with competitive biddingprocedures locally advertised, satisfactory to the Bank. Goods estimated tocost the equivalent of US$25,000 or less, up to an aggregate amount equivalentto US$2.0 million may be procured by procedures of local/internationalshopping acceptable to the Bank. The government prepared and brought tonegotiations updated equipment lists for equipment procurement (para. 6.1).

4.8 Construction materials for improvement and reconstruction forinformal pre-primary schools or warehouses at health centers would be procuredunder local shopping procedures, on the basis of competitive price quotationsfrom at least three suppliers eligible under Bank guidelines, for packages notexceeding US$25,000 equivalent and aggregating to no more than US$3 million.Procurement for larger packages, not exceeding US$200,000, for buildingmaterials for informal pre-primary schools would be administered centrally bythe MOE, using LCB procedures acceptable to the Bank. The necessary skillsand labor would be provided by the community, with technical expertise andsupervision furnished by an engineering firm contracted for this purpose(para. 3.22).

4.9 Packages for furniture would be small, and the furniture wouldbe delivered in small quantities to scattered destinations. Packages under$25,000, aggregating to US$2.5 million, would be procured under local shoppingprocedures; packages between $25,000 and $200,000 would be procured using LCBprocedures acceptable to the Bank. No package is expected to be above$200,000.

4.10 FQO would be procured by the GOV without loan financing.Instructional materials are of diverse categories, and would be procured insmall packages, mostly under LCB procedures acceptable to the Bank.CgMultants required for the project would be hired following the Bank'sGuidelines for the Use of Consultants. Foreign consultants would not besubject to prior registration as a condition of their participation in theselection process. Registration would be a pre-condition, not of selection,but of contracting of consultant services.

4.11 The aggregate amount financed by the proposed project forequipment, construction materials, furniture, and instructional materialswould not exceed US$8.6 million equivalent for LCB contracts, and would notexceed US$5.5 million for local/international shopping procedures.

4.12 The aforementioned procurement arrangements are summarized inTable 4.4. Prior Bank review would be required only for contracts exceedingUS$100,000 equivalent. Other contracts and bid evaluations would be subjectto selective post-award review by Bank staff. All ICB procurement wouldfollow Bank guidelines and bidding documents would use agreed models based onthe Bank's sample bidding documents for goods and works. Sample bidding

- 32 -

documents for civil works (LCB) and goods procurement (ICB and LcB) werediscussed at negotiations. Agreement on model bidding documents to be usedfor the procurement of goods (ICB and LCB) and works (LCB) will be a conditionof effectiveness (para. 6.4).

Table 4.4: PROCUREMENT ARRANGEMENTS(US$ million)

Cat,egory of Expenditure Procurement Procedure TotalIC LCB Other & Costs

Civil works - 16.8 0.3 - 17.1- (14.9) (0.2) ' (15.1)

Equxipment 29.6 5.2 2.6 - 37.4(26.6) (4.7) (2.0) - (33.3)

Food - - 191.6 191.6-l- - (0.0) (0.0)

Construction materials 1.0 3.0 4.0(0.8) (2.8) (3.6)

Furniture - 1.7 0.5 - 2.2- (1.6) (0.4) - (2.0)

Foreign and local - - - 7.1 7.1consultants and studies - - - (7.1) (7.1)

Training - - - 10.3 10.3- - - (10.3) (10.3)

IEC Services - - - 12.0 12.0- - (12.0) (12.0)

Instructional materials - 1.6 0.4 - 2.0- (1.5) (0.3) - (1.8)

Operating costs - - - 37.2 37.2and consumable materials - - - (14.8) (14.8)

TOTAL 29.6 26.3 6.8 258.2 320.9(26.6) (23.5) (5.7) (44.2) (100.0)

Totals represent total estimated costs per category including price andphysical contingencies.Numbers between brackets reflect Bank financing.

DiW=usements

4.13 The proposed Bank loan would be disbursed over a period ofabout six years (Table 4.5), based on a combination of relevant standard IBRD

- 33 -

disbursement profiles for similar countries in the LAC region. Thedisbursement profile used takes into account the fact that the primary healthcomponent (comprising about 76X of total project costs) is expected todisburse smoothly, as it has a very small amount of civil works (limited towarehouse cnnstruction or repair in existing health centers). The profile wasmodified to include the opening of the special account during the initialimplementation stages.

Table 4.5: DISBURSEMENT FORECAST

IBRD Fiscal Year Disbursementsand Semester Semester Cumulative X -Semester

(US$ million)

1991

2nd (Jan 91-Jun 91) 6.4 11.4 6.1 1

19921st (Jul 91-Dec 91) 4.9 11.3 10.8 22nd (Jan 92-Jun 92) 7.9 19.2 18.4 3

19931st (Jul 92-Dec 92) 9.3 28.5 27.2 42nd (Jan 93-Jun 93) 9.8 38.3 36.6 5

1994Ist (Jul 93-Dec 93) 10.4 48.7 46.6 62nd (Jan 94-Jun 94) 11.0 59.7 57.1 7

19951st (Jul 94-Dec 94) 11.0 70.7 67.6 82nd (Jan 95-Jun 95) 10.4 81.1 77.5 9

19961st (Jul 95-Dec 95) 10.0 91.1 87.1 102nd (Jan 96-Jun 96) 8.9 100.0 95.6 11

19971st (July 96-Dec 96) 4.6 104.6 100.0 12

Closing Date: Decenber 31, 1996.

4.14 Disbursements are expected to be completed by December 31, 1996(Closing Date) and would be made against the following categories ofexpenditure covering the activities to be financed under the proposed project:(i) civil works--90 of total expenditures; (ii) equipment (includingvehicles) --100 of CIF cost of foreign expenditures; 100l of ex-factory costs

- 34 -

of locally manufactured goods; and 65X of local expenditures for other itemsprocured locally; (iii) IEC, training, and consulting services--100S of totalexpenditures; (iv) operating costs and consumable materials--on a decliningbasis: 90X up to US$4.0 million equivalent; 60X from US$4.0 to US$10.0 millionequlvalent; and 301 thereafter, Lf the Bank agrees to reallocate proceeds ofthe loan to this category; but no wlthdrawals shall be made for recurrentcosts in respect of expenditures incurred after December 31, 1994;(v) furniture, construction materials and instructional materials --901 oftotal expenditures.

4.15 Documentation of Expenditures. Withdrawal applications forgoods and services with a contract value of US$100,000 or more would besupported by full documentation. Contracts below US$100,000 and otherdisbursements against activities not undertaken by contract would be made onthe basis of Statements of Expenditure (SOE), for which suprorting documentswould be maintained by the MOH, MOE, and MINFAM and would be made availablefor Bank staff review. Because of the large volume of disbursement expectedto be claimed under SOEs, special efforts would be made for the selectivereview of SOE documentation by visiting Bank missions. A Special Account inUS dollars would be opened at the Central Bank, with an initial deposit ofUS$5.0 million equivalent, corresponding to about four months of projectexpenditures.

Auditing and Regorting

4.16 KOH, MOE and MINFAM would keep separate accounts for projectexpenditures ln accordance with internationally accepted accountingprocedures. The MINFAM, in collaboration with the project units and otherproject implementation staff at MOE and KOH, would maintain separate accountsfor the proposed project. The accounts would show expenditures for eachproject component, subdivlded by expenditures financed by the Bank and thegovernment. All project accounts, the Special Account and all disbursementsagainst SOEs would be audited annually by an independent auditor acceptable tothe Bank in accordance with the Bank's auditing guidelines. The governmentwould submit to the Bank the audit reports of expenditure within six months ofthe closure of each fiscal year. The audit reports would certify that fundswere used for the purposes for which they were provided. Assurances wererecelved at negotiations that the GOV would comply with these requirements(para. 6.2).

4.17 The MINFAM would also submit to the Bank semi-annual reports onproject implementatlon and expenditures, special reports prior to annualreviews, and a flnal report on implementation experience and project outcome(Project Completion Report) within six months of the Closing Date of theproposed project. Assurances were received at negotiations that the GOV wouldcomply with these requirements (para. 6.2).

35 -

V. BENEFITS AND RISKS

Benefits

5.1 The proposed project would help cushion the negative effects ofadjustment for the most vulnerable groups in Venezuela, while at the same timeimproving resource allocation and efficiency in the implementation of selectedsocial programs. It would have direct effects on the nutritional status ofpregnant and lactating women, infants, and pre-school children, and wouldprovide improved associated services such as pre-school education and primaryhealth care. It supports the GOV's strong commitment to poverty alleviation.By 1995, the proposed project would: increase health and nutrition servicecoverage from about 200,000 to 420,000 pregnant women; from about 80,000 to360,000 post-natal women; from 245,000 to 640,000 infants under two years ofage; and from 370,000 to 916,000 children between two and six years of age;expand coverage of formal and informal preschool education by about 116,000children from poor and disadvantaged families; improve administrativeregisters for health and education; establish a management information systemfor the social sectors; and conduct periodic household surveys to monitor theimpact of social programs.

5.2 ImRact on Women. The project would benefit women, especiallypoor women, in Venezuela. Towards project completion, about 400,000 pregnantand 360,000 lactating women (about 50X of pregnant and lactating women) wouldhave access to primary health care and nutrition services. This includes notonly pre-natal and post-natal care, but also food distribution, nutritionalcounseling, health education, medical services for women's reproductive care,early cervical and breast cancer detection, and family planning. In addition,the expansion of the community day care centers and preschool system in thepoor and marginal areas would not only give girls from poor families betteropportunities for improved school achievement, after an adequate head start,but would also allow women to pursue additional opportunities for productiveemployment.

Risks

5.3 The main risk derives from the lack of experience of thegovernment in preparing and executing social sectors projects with externalfinancing, especially from the Bank. The implementing ministries do not haveproject staff familiar with international procurement of goods, wotks, orconsultants, or, more generally, with Bank guidelines. Since this would bethe first Bank investment projoct in Venezuela after a long hiatus, domesticimplementation capacity needs to be strengthened. The project would providetraining and technical assistance for the implementing agencies. A countryassessment of local procurement practices has been completed, and aprocurement seminar would be conducted for project staff. Frequent andintense supervision would be undertaken. A project launch workshop to coverimplementation aspects such as Bank procedures, procurement and disbursementmechanisms, would take place soon after loan effectiveness.

- 36 -

VI. AGREEMENTS REACHED AND RECOMMENDATION

Agreements Reached

6.1 The government brought to negotiations the following, for Bankreview and agreement:

(a) evidence that sites for all civil works to be undertaken duringthe first 24 months of the project are ready and available forbuilding (para. 4.6);

(b) updated equipment lists for equipment procurement (para. 4.7);and

(c) terms of reference for studies (para. 3.31); training plans;and staffing plans for the program coordination and projectimplementation units at OTC, PAMI, and PREESCOLAR (para. 3.44).

6.2 At negotiations, assurances were obtained that:

(a) the GOV would prepare and furnish to the Bank by not later thanDecember 1 of each year, starting in 199', annual socialprogram targets, project implementation plans and budgets; andconduct, with Bank participation, annual reviews coveringoverall Social Sectors Action Program targets, policies andactions, project implementation for the past year, andschedules of project implementation, including schoolconstruction plans and budgetary allocations for the followingyear, following criteria acceptable to the Bank. The firstannual review with the government would be held by December 1,1991, and subsequent reviews would be conducted every yearduring project execution. Specific progress review criteriasatisfactory to the Bank have been agreed (paras 3.6, 3.21,3.45 and 3.46);

(b) the GOV would employ engineers or engineering firms tosupervise civil works under the respective components of theproject by July 1, 1991 (para. 3.22);

(c) the GOV would maintain and audit all project accounts(including the Special Account and all disbursements underSOEs) and submit them annually for Bank review (para. 4.16);

(d) the GOV would prepare and submit to the Bank semi-annualprogress reports on project implementation and prepare andsubmit to the Bank a Project Completion Report within sixmonths after the closing date of the loan (para. 4.17); and,

- 37 -

(e) if a situation arises which makes it improbable that the SocialSectors Action Program, or a significant part thereof, becarried out, the Bank will be entitled to suspenddisbursements, either partially or totally (para. 3.6).

6.3 The GOV has sent a letter to the Bank, signed by the Ministersof Health, Education, and the Family, confirming the Social Sectors ActionProgram agreed at negotiations (para. 3.3).

6.4 As conditieiis of effectiveness, evidence will be provided that:

(a) the GOV, through OTC, has made adequate arrangements,satisfactory to the Bank, for the carrying out of therespective components of the project (including transfer ofloan funds) with PAMI and PREESCOLAR (para. 3.42);

(b) key staff for OTC, PAMI, and PREESCOLAR, as agreed atnegotiations, have been appointed (para. 3.44); and,

(c) model bidding documents to be used for the procurement of goods(LCB and ICB) and works (LCB) have been agreed (para. 4.12).

6.5 As conditions of disbursement for co-production activities withmedia organizations, evidence of satisfactory contractual arrangements forsecuring the corresponding rights will be provided to the Bank (para. 3.27).

Recommendation

6.6 Subject to the above conditions, the proposed project wouldconstitute a suitable basis for a Bank loan of US$100.0 million equivalent tothe Government of Venezuela, repayable in 15 years, including a five-yeargrace period, at the Bank's standard variable interest rate.

- 39 -

ANNEX 1Page 1 of 4

VENEtU£LA

SOCIAL DEVELOPMENT PROJECT

Tabl- 1: COMPARATIVE SOCIAL INDICATORS IN SELECTD COUNTRIES

Countries Por Capita Intent Child Lit. Oeaths Acces SecondaryGOP (UnS) mortality Death Expectancy due to to School1987 Rate Rate (y aea) Parasitet Health Enrollment

(per 1000) (per 1000) ( (U) (S)

Venezuela 8,280 28 2 70 6.2 78 88Argentino 2,870 29 1 70 2.0 70 70Panama 2,240 28 1 72 6.7 80 59Costo RIc 1,590 17 1 74 3.6 80 41Chile 1,810 19 0 i1 4.4 8S 69

COMPARATIVE SOCIAL EXPENDITURES(Centr I Government Only)

Countries Educatton Helth Total Social Exponditures1972 1986 1972 1985 1972 1985

(U ot OGP)VYnezuala 4.0 5.1 2.0 1.9 8.5 10.9Brzstl 1.5 1.4 1.2 1.8 8.6 a.8Mexico 2.0 3.1 0.6 0.4 5.6 0.2Korea 2.9 8.4 0.2 0.8 4.2 4.9Chile 0.2 4.7 8.5 2.1 26.9 22.1Costa RIca C.8 4.7 0.7 56. 11.0 14.8

(X of Total Central ovornmsnt Budget)

Venezuela 18.6 19.6 11.7 6.1 89.5 42.6Brazi 0 .8 6.6 0.7 6.5 60.0 41.7Mexico 16.4 11.5 5.1 1.4 40.5 24.8Korea 15.6 16.1 1.2 1.5 22.9 28.8Chill 14.8 12.5 6.2 0.0 62.8 62.2Coot RICa 26.8 16.2 8.6 19.8 58.8 60.0

Source: World Sank, Social Indicators ot Devolomment, 1980; Feeding Latin America's Children (1969),World DOvelopment Report, 1986; and mission estimates.

Note: Total social expenitures Include expenitureson eucation, health, housing and soclal security.

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

Table 2: HEALTH STATUS - COMPARATIVE INDICES

GNP per Lito Crude Birth Crude Death Population Daily Calorie Bables withCapito Expectancy Rat. Rate Per Supply per Low Birth Weights

(1987 US$) (Years) (per 1000) (per 1000) Physician Capita (porcent)(1987) (1987) (1987) (1987) (1984) (1980) (1986)

Industrialized Economies 14,070 76 13 9 450 a,890 n.a.

LAC Region

-Trinidad & Tobeo 4,210 70 26 7 960 3,082 n.s.-Venezuela 3,280 To 31 6 700 2,494 9-Ar9ontino 2,890 71 21 9 870 3,210 6 °-Uruguay 2,190 71 19 11 510 2,648 8-Broz11 2,020 es 28 8 1,080 2,658 8-Mexico 1,830 69 29 6 1,240 8,132 15-Costs Rica 1,610 74 28 4 960 2,80S 9-Chile 1,310 72 24 a 1,230 2,679 7-Colombia 1,240 s6 26 7 1,190 2,643 15-Jamalca 940 74 26 8 2,060 2,690 8

Source: World Bank - World Development Report, 1939.

- 41 -

ANNEX 1Page 3 of 4

VENEUELA

SOCIAL DEVELOPMENT PROJECT

Table a: VENEZUELA: POPULATION PROJECTIONS

YEARS1990 1996 2000 2005 2015 2025

Total Population ('000) 19.761 22,144 24,410 28,512 80,284 85,744

Population (0-14) (percent) 89.8 88.8 ss.0 80.5 25.6 28.4Population (15-44) (percent) 58.2 59.8 82.8 65.0 68.4 08.1Population (65.) (percent) 8.6 8.9 4.2 4.0 6.1 8.6

Birth Rot* 80.7 27.8 28.9 21.1 17.9 16.6Death Rate 6.2 4.9 4.7 4.8 5.4 0.aRate of Natural Increase 2.55 2.24 1.92 1.64 1.25 1.08Not Migration Rate .8 .6 .8 .2 .0 .0Growth Rate 2.08 2.29 1.95 1.65 1.25 1.08Total Fertility a.770 a.as6 2.928 2.540 2.099 2.090Not Reproduction Rate 1.752 1.570 1.878 1.207 1.000 1.000Infant Mortality Rate 80.0 81.0 20.1 21.0 18.9 16.2Dependency Rata 71.9 07.1 60.6 54.0 46.2 46.8

Source: World Bank - Latin America and The Caribbean Region (LAC) PoDulatlon Pro]ections,1989-90 Edition, PPR Working Paper No. 829, November 1989.

-42 - ANNEX 1Page 4 of 4

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

Table 4t VENEZUELA: PRIMARY HEALTH CARE FACILITIESBY REGION (1986)

Region Type I & II Population perHealth Centers Health Center

Anzoategui 290 2,675Apure 84 2,797Aragua 95 12,105Barinas 157 2,643Bolivar 173 4,959Carabobo 86 16,139Cojedes 97 1,773Dist. Fed. 145 17,221Falcon 216 2,726Guarico 138 3,239Lara 226 4,982Merida 168 3,375Miranda 133 13,323Monagas 219 2,119Nueva Esparta 73 3,369Portuguesa 151 3,556Sucre 195 3,549T.F. Amazonas 69 1,057T.D. Amacuro 70 1,214Tachira 186 4,215Trujillo 302 1,709Yaracuy 77 4,532Zulia 230 8,813

Venezuela 3,580 4,969

Sources PAHO/MOHNote: Type I Health Centers are staffed with auxiliary nurses in rural

areas and by general practitioners and nurses in urban areas. TypeII Health Centers are staffed with general physicians and somespecialists.

- 43 - ANNEX 2Page 1 of 12

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

Public ExDenditures in the Social Sectors1

I. Introduction

1.01 An overall look at the evolution of pr%lic expenditure related toeducation and health in Venezuela for the last fifteen years reveals thatit has been growing both as a fraction of total Government spending, and asa percentage of GNP. Despite a general recessionary economy during thelast ten years, there was an expenditure switch towards social services.

1.02 In spite of an overall growing trend, the distribution ofexpenditure between personnel, inputs and material, and investment shows animbalance, resulting in a lack of complementary inputs in some places, andexcess capacity in some others. Personnel expenditure has been growingproportionally as the result of a historically-based budgeting systembiased towards personnel expenditure at the cost of reductions inoperational inputs and materials. A series of extra-budgetary investmentplans has increased the physical infrastructure of the social sectors,disregarding spatial and technical considerations, resulting in localizedexcess capacity and in inadequate regional distribution of facilities.More coordination between planning, budgeting, and operation is needed, atthe ministerial level and for the national five-year plan made byCORDIPLAN.

1.03 The overall contraction of Government spending since 1980 has putpressures to reduce budget allocations. These have resulted inhistorically-based allocations, rather than based on operational needs orplanned targets. Personnel expenditure has been protected by this system,given the political power of public employees unions and/or the need tocover outstanding liabilities (as pension plans) resulting from collectivelabor contracts. Operational inputs and equipment have been systematicallyunderfunded, resulting in a generalized lack of complementary inputs thathinders operational capacity and reduces quality and coverage. On theother hand, personnel expenditure budgeting does not incorporate adequateprovisions for wage increases and human capital investments that should bean essential component of an adequate human resource policy.

1.04 Operational responsibilities within the sectors is fragmented,with one institution in charge of personnel and operational expenditure,another in charge of maintenance and repairs, and still other for buildingnew infrastructure. Better coordination between all these institutions isneeded to prevent resource misallocation and imbalances of complementaryexpenditures.

Bt Based on Gustavo Marquez, "The Recent Evolution of Public Expenditurein Education, Health and Housing in Venezuela'; IESA, Caracas, January1990.

44- ANNEX 2Page 2 of 12

I1. The Evolution of Social Spending in Venezuela

2.01 Social expenditure has increased over the last 15 years, both as ashare of GDP, and a share of total Government expenditure, as shown inTable 1. Social expenditure grew faster than the other total Governmentexpenditures since the slowdown of economic growth at the end of theseventies.

Table 1: Th- EVOLUTION OF SOCIAL SPENDING

1970 1976 lS80 1985

Education Expenditure/GDP 4.8X 4.9X 5.0X t.9XHealth Expenditure/GODP 2.4X 2.1X 1.71 2.6x

Education Expenditure/CGGE 18.4% 18.6% 16.7X 21.1%Health Expenditure/COGE 10.6% 6.9% 5.6x 9.8%

Source: Marquez - The Evolution of Public Expenditure In Education, Healthand Housing In Venezuela, ZESA, Caracas 1990.

Notet COGE = Centrel General Government Expenditure.

2.02 The relative protection of social spending when compared withoverall spending is partly due to the higher weight of current expenditure(83 percent) in social expenditure. Because current expenditure is mostlywages, reduction in this kind of spending is synonymous with either a fallof employment, a decline of real wages, or both. The public sector inVenezuela is highly unionized, so that reductions in either real wages oremployment are generally avoided, only to be used when all other componentsof expenditure have reached their feasible minimum.

2.03 In per capita terms, by 1985 social spending in Educationrepresents Bs. 4.199.3 (at 1989 prices), while Health reached Bs 1.844.These values represented average annual rates of growth between 1970 and1985 of 3.6 percent for Education, and 1.8 percent for Health. As a whole,social spending in per capita terms always grew faster than GDP, tough theevolution of each of the components in social spending varies widely acrossthe period.

III. The Education Sector

3.01 Public education in Venezuela is free at all levels, andcompulsory up to the end of elementary school. The official target forelementary school is 100 percent coverage. Universal education has beenperceived as a symbol of democracy, and has been an important mechanism forsocial advancement for some groups of the population.

- 45 - ANNEX 2Page 3 of 12

3.02 Educational services delivered by the public sector are largelycentralized by the Minlstry of Education (MOE), which fulfills roles asdirect provider of services, as planning and budgeting unit for the sector,and overseer of the whole (public and private) educational system. Theeducational system is highly centralized at the operational and fundinglevel. Elementary, high school, special, and adult education is directlydelivered, and budgeted, by the MOE. Higher education funding is alsoprovided through the budget of the MOE. All budget allocations toAutonomous Institutions within the educational sector are made through theMOE budget. The MOE also coordinates and allocates resources to theRegional Government educational activities. One exception to this rule isbudgeting of infrastructure construction and equipment, the fiLst takencare by the Ministerio de Desarrollo Urbano (MINDUR), the second through apublic sector foundation, FEDE, which receives budget allocations from bothMINDUR and MOE. The other special case is the INCE (a vocational educationinstitution), which receives funds through the MOE budget, but alsofinances its activities through a payroll tax.

3.03 The MOE is also the source of funding for higher educationinstitutions. Some of them, the universities, are autonomousadministrative and operational units, while the rest are dependent from theMOE for all administrative and operational activities. This makes for acomplex mechanism of budget allocation within the public educationalsystem, where different institutions act formally at different levels topresent budgetary requests which must be accommodated within a gross figurefixed by the Central Government.

3.04 Regarding infrastructure and equipment for education, MINDUR is incharge of school buildings, while FEDE, a public sector foundation, was incharge of providing equipment for new schools, and maintenance and repairsfor existing buildings until April 1990. MINDUR plays an important role inthe expansion of the physical infrastructure of the educational system.The system of political negotiation plays an important role at the cost ofminimizing the technical aspects of planning. However, in this case thefact that no direct coordination exists between MOE and MINDUR makes for ahazardous system for infrastructure building that could be totallydisconnected from the detected needs of the educational system. Finally,up to April 1990, equipment was budgeted by FEDE, an institution formallyindependent from both MOE and MINDUR. This institution was created just toensure that independent funding would exist for equipment and repair ofschools, but is presently being phased out. Table 2 shows theinstitutional distribution of consolidated public expenditure in education.The MOE directly executes around 60 percent of total expenditures. Highereducation institutions execute in 1988 28 percent of the total budget,while autonomous institutions execute around 10 percent. The rest isaccounted for investment expenditure realized directly by MINDUR.

- 46 - MM 2Page 4 of 12

lakbisis 11M DTI1UIIWEA* 01651T106O OF C4SCU0ATO PtWLC E(POXIID IN S.CAT10

198 1985 1966 19 1988

(as .,vmn .f

WaI.wy of Idcation S2.7 IS1.701 57.64 s1.2 58.651

flicker iNucatimn InWtuato 8 7.on 88.4 29.095 2B.0i 2?.8

Auto Ie.ti tat.a 7.nti 7.8915 8.95 9.e5.6 9.864

FMS 1.0 1.7 2.88 2.798 2.5m

Omwr 6.65 5.65 6.455 6.89 7.265

i11l855 2.18611 2.4S 8.95 8.05 3.745

6.r.,.: iBaqc (1990)

3.05 Table 3 shows the program composition of the MOE budget. Itindicates a decrease in the relative importance of direct educationalactivities, parallel to an increase in the importance of support andplanning activities. Within educational programs, elementary educationincreased its share, while higher education reduced its participation.

Table 8: THE PROGRAM COWOSITON OF THE MINISTRY OF EDUCATION BUDGE

1980 1984 1980

Ministry d Education

Support, Planning & Adminiot. 80.2X 26.2X 88.2X

Educatioal Programs 88.89 74.91 68.8%. Pre-school, sltensory a *pec. 10.98 30.2X 24.9%. High-shool education 5.9% B.6.5 4.8X. Adult education !/ 2.01 2.4X 1.8X. Highew education 42.15 85.7% J8.4X

e/ Includes Vocational training.

Soureo: Marque (190)

- 47 - ANEX 2Page 5 of 12

3.06 Regarding officiency in the allocation of public resources toeducation in terms of the relative growth of the segments of theeducational system, and in terms of quality of the education delivered,available indicators suggest that resource allocation in education has beenexcessively tilted towards higher education (universities and colleges).and too little has been dedicated to high-school education. This does notseem to be justified either in terms of the population covered, or in termsof social rates of return to different levels of achievement in theeducational system.2

3.07 Literacy and specific school attendance rates are shown inTable 4. Elementary education coverage is high, even if below the100 percent target. Venezuela ranks tenth in gross coverage for elementaryschooling among Latin America, fifteenth for high school, and fifth forhigher education.3 These rankings indicate some disproportion betweencoverages in high school and higher education, suggesting that theprogression path through the educational system has a bottleneck in thetransit between elementary and high school, where coverage rates dropsharply. In fact, the Venezuelan educational system seems to deliver twotypes of outputt a person vith elementary schooling, or a person with morethan 13 years of schooling with a university degree. There are noalternatives for elementary school graduates who do not want to pursue ageneral secondary education, beyond INCE and a few other technical schools.

Tgble 4s EUCATION - SELECTED INDICATORS

1906 1960 1984 198t

Llterac tet 87.7 89.6 00.210-14 rorv old 90.1 97.0 906.415-24 yore old 9S.2 9B.8 90.525 yar. old and aore *1.1 81.s .S

Seb"l e_eadmact rat. (per hundred persons of the age group)Prc-_chool 19.4 29.6 U3.7 88.9Elemntery education 81.0 86.0 86.2 86.2High school 81.8 U8.6 87.8 80.0Higher educetion 15.2 17.4 19.2 21.6

P.rtielpatze of PubUe Secter es totl enrolluIPrechool 76.6X 80.11i 84.06 6a.4sEleetary education 69.03 6.651 88.51 89.0tHigh chool 62.63 80.$X 61.90 61.6%Higher education ?0.63 67.13 61.53 78.93

Source: Iarqe (100)

21 For an evaluation of social rates of return on education, seePsacharopoulos, G. and Steir, E. "Education and the Labor Market inVenezuela, 1975-1984%, Economics of Education Review (3, 1988)s321-332.

3/ See IDB. 'Pro,- -eso Economico y Social en America Latina - Informe 1989'

- 48 - ANNEX 2Page 6 of 12

3.08 This observation is further confirmed by an analysis of theevolution of expenditure by student in different levels of the educationalsystem. By 1988, high-school education ranks last between all levels ofthe educational system, while higher education expenditure by student ismore than 10 times that of elementary education (see Table 5).

Table Ss EXPENDITURE BY STUDENT IN MINISTRY OF DUCATIONEDUCATIONAL PROGRAMS(constnt 1989 Be.)

19S0 1984 1988

Educational Pogrrm* Pro-school, elemntary A spec. 4,500 S,8U 4,608, High-school 5,009 4,858 8,097, Higher education 91,070 83,118 54,858

Source: Marquez (1990)

IV. The Health Sector

4.01 The most important institutions in terms of population andgeographical coverage are the Ministry of Health (MO0) and the VenezuelanSociul Security Institute (IVSS). The MOB system theoretically covers allinhabitants, being a universal health system with free access, financedthrough the Central Government budget. The IVSS is partly financed througha universal payroll tax, though it also receives funds through the Ministryof Labor budget, and access to the system is restricted to affiliatedemployees and their families. A large fraction of workers in the informalsector do not have access to the IVSS system as they are not registered bytheir employers.

4.02 The MO0 has a complex organizational structure, where the mainactors are the Direccion General Sectorial de Salud, the Direccion Generalde Malariologia y Saneamiento Ambiental, and the 23 Direcciones Sub-regionales de Salud. The first is a central unit in charge of formulationof health policy, the second is an operational unit in charge of thecentral and regional operations of the sanitation and prevention services.All operations of hospitals and health centers dependent frci MOH iscontrolled and supervised by the Direcciones Sub-regionales de 3alud, whichin fact act as local representatives of MOH in the regions.

4.03 Regarding infrastructure, again MINDUR comes into play as builderof new hospitals and general health infrastructure. No formal coordinationof MO0 and MINDUR exists, so infrastructure construction does notnecessarily follow the MOH planning of delivery of health services.

- 49 - ANNEX 2Page 7 of 12

4.04 Table 6 shows the distribution of MOH expenditure by program. Theactivity that increased its share was Support, Planning and Administration,while all other activities decreased in weight within the budget. MedicalAttention, Disease Control and Prevention, and Environmental Controlredaced their importance within the MOH budget. Given the increase inhealth risks associated with the economic situation since 1980 this seemsquite dangerous. Particular attention deserves the case of Disease Controland Prevention. The apparition of urban foci of malaria in 1988 was due tothe lack of sanitation activities during the last decade. As enormousinvestments were done during the forties in Venezuela to control malaria inrural areas, the resurgence of this disease forty years later casts doubtsabout the long term consistency of sanitary policy and, by implication, ofresource allocation within the health sector.

Table 6: THE DISTRIBUTION OF MINISTRY OF HEALThEXPENDITURE BY PROGRAII

1980 1984 1988

Support, Planning & Administ. 67.8% E8.1% 70.0XMedical Attention 08.5% 87.01 25.5%Disease Control and Prevention 8.8% 8.4X 2.8XEnvironmentl Control 1.9% 1.4X 0.9%

Source: Marquez (1990)

4.05 Table 7 shows that the share of personnel in total MOH expenditureexpanded from 52 percent to 73 percent between 1980 and 1988. At the sametime, the share of operations and maintenance expenditures was halved. Theincrease in the share of personnel, together with the reduction ofoptrational expenditures, poses the question of availability ofcomplementary inputs in the delivery of services. In many instances it hasbeen reported that persons seeking medical attention at a public hospitalmust provide their own medicines, cotton, and bandages. This shows thatsome form of direct payment for health services is already imposed on theusers of the system. This form of payment does not have any relationshipwith the user's ability to pay, or with priorities regarding who and whatshould be financed through public funding of the health system. Now, ifpayments are to be used as restrictions of access to the public healthsystem, there should be a rationale based on ability to pay or kind ofservice to be paid for. The present system does not respond to any ofthese criteria, and obstructs access to the health system for the poorergroups of the population.

- 50 - ANNEX 2Page 8 of 12

Table 7: TW COMPOSMON OF MINISTR OF HEALINEXPENDITURE

(shares of total consolidated expenditure)

1980 1904 1980

ITALCurrent Expenditure 90.4 99.6X 99.21of which: Per"onnel 524X 72.91 75.1X

Operations * Maintenance 42.?X 22.61X 22.0XTranefera to Private Sector 8.8X 8.99 4.1X

Capital 1.61 0.6X 0.8X

Sources Marquez (1990)

4.06 General indicators of the health situation (Table 8) show adefinite long-term improvement for Venezuela. Infant mortality rates havedropped sharply since 1975; within diagnosed mortality causes, enteritisand diarrhea are low; the number of physicians and nurses per capita haveincreased; and the number of hospitals and hospital beds per inhabitant hasincreased somewhat. Regional distribution of resources, though, is notequitable, and low-income, high-risk regions are not adequately covered.On the other hand, the health system is too centralized at the hospitallevel, where attention is extremely expensive, and not enough resources areInvested in prevention and entry-level attention, which could also be morecost-effective.

4.07 Experts on the field agree almost universally about the importanceof the integration of the multiple health sub-systems in a National HealthService. A law has been enacted creating the National Health Service, butimplementation is slow, as it has to break the resistance of physicians, ofunions, and sometimes of users, who perceive that the unification of thesystem could damage their respective vested interests.

4.08 Lack of complementary inputs is without doubt the most seriousissue facing the system today, competing with duplication of services insome regions and insufficiency of facilities in some others. Theunification of the health delivery system could solve both issues, as itwould free planning and general overhead resources that could be used toprovide complementary inputs.

4.09 The number of immunizations per children under four years somewhatdeteriorated in the period between 1984 and 1987. This is a worrying trendbecause it could increase the incidence of preventable diseases, thusraising demand on the medical attention system.

In

- 51 - AUANEX 2Page 9 of 12

T*l- 9: SELECTED HEALTH SITUATION INDICATORS

1976 1980 1984 19l

Infant Mortality (rates per 1,000 liv. birthe)Total les than 1 year old 43.8 81.7 28.5 28.0"bonMI 21.7 16.J 15.7 14.6Pot-natal 22.1 15.0 12.6 10.3

General mortality by cause (rates per 100,000 persons)Total 621.6 662.2 487.6 448.8Ieart dls 79.6 68.6 74.4 78.5Acoidente 55.7 68.6 47.0 44.9Cancer 54.0 58.0 49.0 U4.4Affections originated at birth 46.7 40.6 88.1 U1.6Cerebro-vascular d tecae 80.5 38.2 26.5 28.4Pneumonias 88.9 21.0 16.7 18.1Entritto and other diarreic 36.5 21.0 15.9 12.6Suicidee and homicidee 12.8 14.7 15.8 11.6

Huan Resources (per 1,000 Inhabitante)Physicians 1.18 1.17 nla 1.65Graduate nurse 0.68 0.79 n/a 0.79Auxiliary nur 1.94 2.86 n/a 2.19Odonthologi te 0.81 0.85 n/a n/.Other 0.28 n/a n/. n/.

Infrastructure and oquipmantHospitals (per 100,000 Inhabitants) 8.17 8.29 3.04 2.96

Public 1.55 1.22 1.26 1.28Private 1.62 2.07 1.77 1.70

Hoop. beds (per 1,000 lnhabitante) 2.99 2.97 2.72 2.81by ad eription

Public 2.49 2.28 2.09 2.01Private 0.50 0.70 0.64 0.60

Iinunizatione (per children under 4 yarr)Polio 1.42 1.38 1.00 0.65Triple (OPT) 0.44 0.81 0.26 0.26masles 0.21 0.27 0.19 0.25Anti-manlria (per 1,000 Inhabitants) 0.05 0.08 0.08 0.04Bco 0.26 0.24 0.31 0.27

Source: OCEI - Anuario Ertadisttco de Venezuela, various y e.MON - Anuareo de Epidemiologic y Estadistica Vital, various years.MON - Memori y Cuotc, various years.

- 52 - ANNEX 2Page 10 of 12

V. Social Expenditure and Economic Adjustment

5.01 The effects of the 1989 economic adjustment on social expenditurewere aggravated by the perception that delivery of social services hadreached a maximum level of inefficiency and quality deterioration. In thenew orientation of economic policy, direct subsidies are preferred toindirect subsidies as an income redistribution device. Social expenditurehad been for the last thirty years an apparatus directed to incomeredistribution, both in terms of employment generation in the publicsector, and in terms of massive delivery of social services free of charge,without precise targeting of the beneficiaries.

5.02 With both theoretical and practical considerations pushing towardthe establishment of a direct subsidies-based system, the GOV hasestablished a new set of more precisely targeted direct subsidies, toaccompany the elimination of the old system of indirect subsidies. Theseinclude cash subsidies to the parents of the poorest elementary schoolstudents, delivered through new organizational channels, community day carecenters in marginal areas, and nutrition and health interventions for themost vulnerable groups.

5.03 The Government has ihcreased the share of social expenditure inthe total Central Government budget, from 25.1 percent in 1988 to30.5 percent in 1990.4 However, the allocation of resources between thesocial system (the HOE, MOH, and related Autonomous Institutions), and thedirect subsidies remains an issue. The "Plan de Enfrentamiento de laPobreza' is an attempt to conceptualize the problem, trying to identifywhich of the old programs contribute directly and efficiently to the needsof the poor, and which institutions should best administer the directsubsidies. An important function of the Plan is to evaluate theconsistency of budget allocations with the Government's new social program.

5.04 The activities grouped in the 'Plan de Enfrentamiento de laPobreza' increase their share in total social expenditure from 13 percentin 1988 to 22 percent in 1990. They range from existing, but previouslyunder-funded, programs in MOE and MOH, with a significant expansion in'Hogares de Cuidado Diarion (a publicly funded day-care program for infantsand toddlers in marginal urban areas), as well completely new directsubsidies as the Becas Alimentarias and Utiles Escolares programs. Thesenew direct subsidy programs are generally attached to the organizationalstructure of one or other of the existing Ministries. The BecasAlimentarias and Utiles Escolares programs are the biggest of the newdirect subsidies (for an estimated amount of Bs 13 million), and areattached to the HOE.

4/ This section draws heavily on Garcia, H. 'E1 presupuesto de 1990 y laestrategia para el enfrentamiento de la pobreza', a report prepared forthe Ministerio de la Familia, Nov. 1989.

-53 - ANNEX 2Page 11 of 12

VI. Public Sector Investment Program for the Social Sectors

6.01 The Eighth National Development Plan earmarks Bs. 202 billion forinvestments in social services. The Plan*s priorities in this area are toimprove the coverage and the quality of social services such as primaryhealth, basic education, drinking water and sanitation, and to increase thestock of housing and serviced lots. The Plan document focuses on thephysical infrastructural requirements derived from service coverage targetswithout any analysis of the individual agencies' institutional capacity toundertake the envisaged sectoral investment programs or of the subsequentrecurrent cost implications of the capital investments proposed for theperiod.

Tablo 9: PRIORITY SOCIAL SECTOR INVESTMENT PROMRAM(Be. Mlllion, 1989 Peices)

Proors Proposed Amounts8e million s

Pre-school Educatton 20,000 (9.9)Basic Education 14,400 (7.1)DiversIfIod EducatIon 6,460 (4.1)Htgher Education 6,000 (2.6)Rural and Outpatient Centers 8,600 (4.2)Hospitals 10,000 (6.0)Urban Water Supply 13,900 (809)Urban Sewerage System 12,700 (6.3)

Neighborhood Improvemnt 8,000 (4.0)Housing 88,600 (42.6)

Day-care Centers 2,000 (1.0)Other 11,600 (5.8)

Totel 202,150 (100.0)

Source: CORMIPLAN, VIII Plan do Is Nacion, 199O

Education

6.02 As part of its policy to focus social spending specifically onpoverty-oriented programs, the Government has allocated 222 of the 1990Central Government Budget to those activities included in its PovertyAlleviation Plan. They range from the existing but previously under-funded*Rogares de Cuidado Diariol (a publicly funded day-care program for infantsand toddlers in poor urban neighborhoods) to completely new initiativessuch as the 'Becas Alimentarias' and 'Utiles Escolares", programs of directsubsidies which are to be managed by the Ministry of Education. These twoprograms together are estimated to cost the Ministry Bs. 13,000 million, or

- 54 - ANNEX 2Page 12 of 12

19Z of its total budgetary allocations in 1990. To offset the cost ofthese new initiatives, the 0 & M allocations to the Ministry of Education'songoing programs were reduced in real terms by some 102 between 1989 and1990. As important as the new emphasis on poverty alleviation programs is,the Government will need to ensure that adequate funds are allocated topermit smooth operation of the country's public educational services.Education is an important public good and an effective vehicle for incomedistribution over the longer term.

6.03 With reference to the Eighth Plan and CORDIPLAN's proposals foreducational investments for 1990-1993, the investment program consistsessentially of a list of ideas on educational infrastructure projects. Thelist was prepared on the basis of infrastructure requirements projected byCORDIPLAN, assuming specific service-population coverage ratios. It isextremely difficult to evaluate these ideas because no concrete informationwas available on the geographical distribution of these project ideas, thecharacteristics of the population to be served and the effective demand foreducational services in any given location. The Plan only gives aggregatecost figures with no data on the cost components or on the phasing ofindividual works. More importantly, the Plan document does not include anyanalysis of the recurrent expenditure implications of these infrastru.-turalinvestments. More work is needed to transform this list of ideas intoconcrete, financiable projects which could be individually assessed againstoverall sectoral priorities and included into the annual budgets of theMinistry of Education, MINDUR and their affiliated agencies. In all this,an important pre-requisite is coherent sectoral planning. The Governmentshould concentrate resources on strengthening the planning and budgetingfunctions at the Ministry of Education, to introduce more technicalcriteria in project evaluation.

Health

6.04 During the 1990-1993 period, CORDIPLAN proposes investing some Bes.8.5 billion in the construction and equipping of health centers, andanother Bs. 10 billion for the construction and/or rehabilitation ofhospitals. There is no discussion in the Eighth Plan document on thereportedly poor conditions of the existing health infrastructure and thepotential cost of upgrading these facilities to an acceptable standard foroperation. Nor is there an analysis of the recurrent expenditureimplications of operating the existing and new health infrastructure atfull capacity. As in the case of education discussed above, it isdifficult to assess these proposals. The health sector investment programfor 1990-1993 recommended by CORDIPLAN is no more than a listing of projectideas without a clear definition of regional coverage or beneficiaries andwithout any evaluation of the likely demand Zor the services to bedelivered.

6.05 The Government needs to make the existing public health deliverysystem function more efficiently. This would entail (a) integrating theexisting health subsystems under a single National Health System asprovided by law; (b) remedying the current regional disparities in coverageand quality of health services by strengthening the sectoral policyformulation and services standardization functions of the MOH; (c)increasing budgetary allocations for operations and maintenance, and awayfrom personnel; and (d) shifting resources from the hospital-based tertiarycare to the health center-based primary care.

- 55 -

ANNEX 3Page 1 of 2

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

Table 1: VENEZUELA: PERCENTAGE OF FAMILIES LIVING IN POVERTYCONDITIONS BY REGION

1982-1989

1982 1989

in Extreme 2 in Critical 2 in Extreme Z in CriticalRegion Poverty Poverty Poverty Poverty

Caracas 2 10 7 22Rast of Capital 3 19 18 33Central 7 21 19 32West Central 15 29 28 36Zulia 9 24 36 40Andes 23 32 27 30South - - 42 16Northeast 18 30 35 36Guayana 4 18 13 (1987) 30 (1987)Venezuela 10 22 2;.3 31.4

Sources B. Garcia and J. Newman, *Pobreza en Venezuela", September 1988;OCEI Household Survey 1989.

Note: A family is defined to be in *extreme poverty' if their income fallsbelow the level required to purchase a minimum basket of food items.Critical poverty corresponds to a family income above that needed topurchase the minimum food basket, but less than twice the requiredamount.

VENEZUELA

SOCIAL DEVELOPMET PROJECT

Table 2: VENEZUELA: REGIONAL POVERTY INDICATORS

S of Mom" W of HemsEarning with X of HaomS

Unemploymont 88 so/r por a people/ Illiteracy with General InfantRate capita room Rate Runing Mortlity Mortality

Relon 1986 198 1981 (Ag 10+) Water Rate Rate

Diatrito Federal 5.9 4.8 16.8 5.4 60.0 4.6 21.4mieandb 5.6 9.4 16.9 8.4 70.4 4.5 31.7Aragua 8.3 165. 17.2 9.7 64.1 4.6 31.2

Nuevo Esperta 7.2 19.1 16.0 14.7 69.5 4.6 24.8

Carabobo 8.7 14.8 16.8 10.0 61.0 5.0 39.?

Bolivar 10.7 14.6 21.2 11.4 49.S 4.8 81.9

Tachlre 6.2 37.6 22.4 16.9 72.5 6.9 39.2Anzoategul 11.4 19.2 22.5 14.6 48.5 4.6 31.5 Utul a 8.6 20.6 26.2 18.8 50.8 6.5 37.6 0'

T. Amazonas 9.1 34.4 18.5 27.2 99.0 4.0 67.0Merid 4.9 89.0 21.7 20.1 69.0 6.1 40.2Lars 7.0 29.8 25.8 18.8 64.4 6.7 43.6Falcon 9.8 26.9 24.9 17.7 48.5 6.4 32.0Monaga. 11.2 28.6 28.4 1,.9 61.3 6.0 37.6Sucre 10.1 86.6 26.2 28.1 62.9 4.9 29.7Yaratuy 9.2 32.8 28.0 21.4 65.2 6.7 42.8T. D. Asacuro 18.3 34.4 21.8 24.4 99.0 6.7 42.0Apur. 9.4 44.4 88.1 25.8 84.7 4.6 22.6

Guarico 9.8 29.8 27.0 20.9 49.8 6.9 44.s

Cojedes 10.1 83.9 26.7 27.5 48.6 6.6 29.5Trujillo 6.2 42.1 80.8 26.7 61.0 7.0 50.2

Portuguese 7.7 88.0 29.0 23.4 47.9 6.7 56.8BearIa 8.7 42.7 80.8 23.4 47.6 6.2 50.4

Sourcet Miniotonie de Ia Familia.

Note: All data are for 1981 with the exception of those on unemployment and incom, which are for 1986.

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AME 4Page 1 of 7

VENEul

SOCIAL DEVELOPENT_ PROJECT

Description of aev Targeted Social Programs Expandedor Established since 1989

A. PRESCHOOL EXPANSION

General description:

Expansion of preschool education coverage using formal and non-formalschools. Whereas in formal preschools, teachers are only required towork 5 hrs/day, in non-formal schools, teachers will be required to workfull-time and provide health and nutrition education in addition to theregular educational curriculum.

Target population:

Children of pre-school age (4-6 years).

Coverage:

96,000 students in formal pre-schools; 16,000 in non-formal pre-schoolsthroughout the country.

Potential pooulation:

Of 1,700,000 children in preschool age, less than a third currentlyattend preschool.

Targetin: criteria:

Limited. Covers students from low-income families living in poor areasidentified by local (sate and municipal) education authorities.

Decentralization:

Limited. A portion of state education budgets, teachers and supervisionwill be utilized for the formal preschools. The non-formal pre-schoolcomponent will be implemented by local level NGOs and communityorganizations.

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AE[L4Page 2 of 7

Non-government involvement/Distribution mechanism:

Limited. NGOs will administer the non-formal portion of the preschoolexpansion, although the Ministry of Education will continue to supervisethe program and pay the teachers.

Sources of funds:

Central and state budgets, international resources.

Implementation history:

The program has just been designed; implementation is expected to beginin 1991.

B. NUTRITIONAL GBANT (Beca Alimentaria)

General descriDtion 1

A direct cash transfer of Bs. 500 per month/per child, for up to threeschool-age children, to the mothers of needy school children. Theultimate objective of this direct transfer is to raise the income levelof poor families in order to improve the nutrition level of thestudents, and to increase school attendance.

Targ2t 2oDulation:

Families with children in the first six grades of primary school in poorurban and rural areas.

Cover'ag2:

In Kay 1990, the total number of beneficiaries was 1.61 millionstudents. By end 1990, the program is expected to reach 1.72 millionstudents on a monthly basis.

Potential 2oulation:

All schoolchildren in grades one to six from low-income families.

1 Due to delays in the design of the program, the first threepayments of Beca Alimentaria were used to create a program (4tilesescolares) to provide school uniforms to children of low incomefamilies.

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ANNEX 4Page 3 of 7

Targeting criteria:

Partial. Low-income areas were identified based on poverty maps (UNDPMapa de Pobreza, and FUNDACREDESA Map). These maps, however, onlyprovide disaggregated information up to the municipal level, therebyexcluding poverty identification at the barrio level. Specific schools(public and private) were selected according to information obtainedfrom District Education Administrators and Supervisors (the "expertcriteria" approach). Adjustments are underway to correct formistargeting.

Decentralization:

Very limited. The program is administered from the Ministry ofEducation at the central level. Although ministry representatives atthe state level are involved in the process to redress problems ofmistargeting, no local government agency has taken part in the design,supervision or delivery of the grant. However, representatives from theeducational community (comprised of school administrators, teachers,parents and students) form a local commission to supervise the processat the local level.

Non-government involvement/Distribution mechanism:

Yes. 37 private banks, with 794 branches, deliver the grant every twomonths. The program is organized by the Ministry of Education withcentral budget resources. The local commission to supervise the grants(see above) draws members from the community.

Sources of funds:

Central government.

Implementation historv:

Program started in November 1989, with initial financing until July1990. The Government recently extended financing to cover the 1990/91school year. The original concept was to establish the program on atemporary basis, gradually phasing it out, perhaps in favor of a schoolfeeding program. Studies will be undertaken to evaluate the efficacy ofthe current program and to explore other longer-term alternatives.

C. MATERNAL-CHILD HEALTH PROGRAM (Programa Ampliado Materno-Infantil, PAM1)

General descrigtion:

Provision of medical and nutrition services to pregnant and nursingwomen, and children under the age of six living in poor urban and ruralareas. The objective is to provide a nutritional supplement free ofcharge to the target population in order to attract the most vulnerablegroups to health posts for medical care and to eventually improve their

- 60 -

ANEX 4Page 4 of 7

nutrition status. For example, children up to six years old withmalnutrition are provided three kg milk/month while children withoutnutrition problems are provided two kg milk/month. Pregnant andlactating women receive two kg milk/month, while those under riskreceive three kg milk/month. Each delivery of milk must be accompaniedby a medical check-up.

Target poRulation:

Pregnant and nursing women, and children under six years of age.

Coverage:

In 1988, about 25X of pregnant women received prenatal care and only 5Sreceived post-natal care in public health centers. No more than 16X ofinfants under two years old and 10 of pre-school children from two tosix years old received health care in public health centers that sameyear. By 1994, the PANI program is expected to assist in expandingcoverage to 50X of pregnant (420,000) and post-natal women (360,000),501 of infants under two years old (640,000), and 30% of pre-schoolchildren (916,000). Expansion of coverage will be exclusively for low-income groups. PAKI has been successfully implemented in ten healthcenters in the state of Trujillo, where coverage has already increasedfive-fold in certain rural areas.

Potential po_ulation:

All pregnant and lactating women and children under six years of ageliving in poor areas.

Targeting criteria:

Effective. Population covered by health centers located in poor urbanand in rural areas.

Decentralization:

Limited. At this stage decentralization is limited because of the needto maintain control over the start-up phase of the program. It isanticipated, however, that some administrative responsibilities of theprogram will be transfered to local level PAMI officials. Procurementof milk is currently carried out at the central level, but there areproposals for decentralizing the purchase of food to local leveldistribution companies in addition to their distributionresponsibilities.

Non-government involvement/Distribution mechanisms:

Limited. Services are provided by the Ministry of Health through localhealth posts and the PAMI Foundation (an autonomous institution under

- 61 -

ANNEX 4Page 5 of 7

the purview of the Ministry of Health). Although the PAMI Foundationcurrently procures the milk for the program, private distributioncompanies are responsible for distribution and supervision of powderedmilk stocks (and eventually other foodstuffs).

Sources of funds:

Central budget, international donor agencies.

Implementation historv:

Program started with ten health centers as a pilot project in Trujilloin december 1989. it is in the process of expansion and is expected toreach 15 states by end 1990, and all 23 states by December 31, 1991.

D. COMMUNITY DAY CARE CENTERS (Hogares de Cuidado Diario, HCD)

General descriRtion:

A home-based child care program which attempts to provide for nutrition,health and childhood development needs for poor children, as well as topromote community education and development. Until recently, there hasbeen only one type of HCD -- approximately eight children per day-carecenter attended for a 12-hour period by one community mother in herhome. The GOV provides a loan to equip the homes for day-care and amonthly stipend to the day-care provider (which is supplemzented by feespaid by parents of the children).

In the context of the GOV Poverty Alleviation Plan, three additionalmodels have been proposed for implementation in the future: (a) part-time HCDs (four hour shifts); (b) multi-HCDs, in which three communitymothers provide care for 30 c&ildren in a specially adapted communitycenter, and (c) natural HCDs, tuensing on the poorest of families inwhich mothers do not (or cannot) work. In this program the biologicalmother receives food for up to three children.

Target Dopulation:

Children from three months old to six years old, from poor to lowermiddle-class neighborhoods.

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ANNEX__4Page 6 of 7

Coyrerag2

By the end of 1990, it is expected that approximately 11,400 HCDs willbe caring for 100,000 children. In four years, this program is expectedto reach 462,000 low-income children. It should be noted, however, thatin Nay 1990 there were only 3,740 HCDs attending 22,440 children. 2,000centers were opened in the last quarter of 1989, and are managed by aprivate non-profit foundation (Fundacifn del Niflo) which receivesfunding for administering the program through the Ministry of theFamily.

Potential nonulation:

About 1.3 million children could potentially benefit from this type ofprogram, of which some 600,000 live under very poor conditions.

Targeting criteria:

Limited. Poor neighborhoods as determined by officials of the Ministryof Family or the Fundaci6n del Nifo. However, because the day-carehomes are required to meet minimum standards (eg. cement floor, runningwater, sufficient physical space, etc.) many HCD's are not in thepoorest neighborhoods. Until very recently, attendance to HCD's waslimited to children from families with working mothers, thus excludingpoor children from non-working mothers.

Decentralizatin:

For the portion of HCD's under Fundaci6n del Nifto, there is considerabledecentralization. In this context the wife of the Governor of eachstate is the head of the Board of Trustees at the state level. For theremaining HCD's, it remains unclear which NGOs and communityorganizations will be utilized. At present the Ministry of the Familyis the only institution exploring these alternative implementationmechanisms.

Non-government involvement/Distribution mechanism:

The most important implementing agency is the Fundaci6n del Nifuo, towhich direct implementation of the program was transferred from theNinistry of the Family in 1989. However, for the expansion of theprogram, it is estimated that the Fundaci6n will only have the capacityto administer 50X of the program. Conseq"ently, it is expected thatother NGOs will be incorporated into the program.

- 63 -

Page 7 of

Souces Of funds:

Essentially central funds, with some private participation. Of theaverage cost/child (Bs. 1,515/month), Bs. 300 are paid by the naturalmother directly to the "community mother".

Implemettation history:

Hogares de Cuidado Diario were initiated in October, 1974, implementedby the Fundaci6n del Nito.

-64 - ANNEX 5Page 1 of 6

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

SOCIAL SECTORS ACTION PROGRAM

Caracas, 1 9 OCT 1990

Mr. S. Shahid HusainVice-PresidentLatin America and the Caribbean RegionWorld Bank

Dear Mr. Husain,

SUBJECT: Venezuela - Social Sectors Action Program

1. The Social Development Project to be financed in part by the WorldBank is designed to assist the Government in redirecting its social sectorexpenditures toward well-targeted and efficient programs, and in financing highpriority activities. The project aims to: mitigate the potential adverse impactof the adjustment program, while improving health, nutrition, and educationservices for a large and poor segment of the population, especially pregnant andlactating women and children under six years of age; replace indirect subsidieswith targeted social programs, while improving their efficiency and rationalizingtheir distribution; and promote institutional development by improving theplanning and management capacity in the Ministries of Health and Education, aswell as the capacity to target, develop and monitor social programs in theMinistry of the Family. These actions will be carried out within the frameworkof the Government's broad social policies and programs over the next five years(Social Sectors Action Program - SSAP), which are described below and in theaccompanying matrix.

2. The project presents an opportunity for continued policy dialoguewith the World Bank and promotes internal coordination among the Ministries ofthe Family, Health, and Education. Progress in the execution of the policiesoutlined in the SSAP, and in project implementation, will be discussed with theBank during joint annual reviews of the project; and the SSAP will be modified,if necessary, in a manner agreed with the Bank.

3. The Ministry of the Family is responsible for coordinating publicsocial programs within this project among the executing agencies, such as theMinistries of Health and Education and the Fundaci6n del Nifo, among others. Thesocial sectors strategy aims to improve efficiency in the use of scarce resourcesby concentrating public resources in direct assistance programs targeted to themost vulnerable groups and by improving the efficiency of government institutionsand their actions and interventions in the social sectors.

4. The Government's primary health care strategy and health servicesnetwork will be strengthened, by increasing health care coverage and nutritionalinterventions among the poorest segments of the population.

- 65 - 5

Page 2 of 6

5. The Government is concerned about the low coverage of pre-schooleducation, especially for the poorest groups. In consequence, public funding willonly be used for expanding pre-school coverage in the poorest rural and urbanareas. Community participation will be encouraged for school construction andrepairs, and non-governmental organizations will be encouraged to expand theirparticipation, especially in non-conventional pre-school modes.

6. The Government recognizes the need to promote and strengthen theobjectives of the Social Development Project through a comprehensivecommurications program. We will thus develop an information, education, andcommunications strategy and plan which will improve awareness and knowledge ofsectoral staff, communities, and the general public, through community educationand participation programs and mass media campaigns.

7. The Government will monitor the impact of its social programs and ofchanges in social indicators in accordance with the inter-ministerial agreementsigned by the Ministries of the Family, Health, and Education and OCEI, on March19, 1990.

8. In addition, the Government will undertake the following socialprograms and financial and management policies during the project implementationperiod:

Social Programs

(a) Nutritional Grant (Beca Alimentaria). The grant consists of a directtransfer of Bs 500 per month to the mothers of needy schoolchildren, up to the sixth grade of primary school. Participatingschools were identified through the national poverty map as servingmarginal (urban or rural) areas. The program was initiated inNovember 1989, and the MOE is at present providing grants to about1.7 million children. An evaluation of the program is underway, butpreliminary findings indicate that the program has been welltargeted to the poorest areas of the country and has contributed toincreased school attendance. This evaluation, which includes thetargeting and effectiveness of the program, the amounts of thegrants, and a comparison of its effectiveness to that of othereducation interventions, will be completed by August 31, 1991. Theresults of the evaluation will be discussed with the Bank bySeptember 30, 1991, and agreed actions will begin to be implementedby October 31, 1991. The program will continue to be implemented forat least an additional year (to cover the 1990/91 school year);

- 66- ANNEX 5Page 3 of 6

(b) Maternal-Child Health Care (Salud Materno-XnfantilV. The programaims at expanded coverage and improved health care services for themost vulnerable groups, particularly women and children. Serviceswill be improved by following the prLmary health care strategy,which will be managed by the Directorate General-Health Sector(MOH), with the support of the Permanent Primary Health CareCommission. The nutritional component of the program was initiatedin December 1989, with UNICEF assistance, covering ten healthcenters in the state of Trujillo. The PAMI Foundation, anautonomous unit attached to the Ministry of Health, established inMarch 1990, will contract for food procurement and distribution.The Government plans to gradually expand coverage throughout thenational territory, starting with 15 states before March 31, 1991;and reaching the 23 states before December 31, 1991;

(c) School Feeding Protram (Programa de Alimentaci6n Escolar). TheMinistry of Education is preparing a proposal for a school feedlngprogram for needy primary s_hool students, which will carefullyevaluate the viability of consolidating existing programs and thecost-effectiveness and feasibility of supporting a school feedingstrategy. The proposal will be completed and sent to the Bank byJune 30, 1991; and will be discussed with the Bank by August 31,1991. If viable, agreed actions will begin to be implemented duringthe 1991-92 school year;

(d) Community Dav-Care Centers (Hogares de Cuidado Diario). This programcombines the goals of supplemental feeding, day-care for poorchildren, and community education and development. It also givespoor women additional opportunities for income-generating activitiesby guaranteeing adequate low-cost day care for their children duringworking hours. Community mothers, in their own homes, provide daycare for six to eight children up to six years of age. TheGovernment provides a loan to equip the homes for day care, donatestoys and other necessary materials, and provides a monthly stipendto the day-care provider. This is supplemented by fees paid byparents of the children who are being cared for in the center.Direct implementation of the program is being transferred to theFundacion del Nifto and other non-governmental organizations; and2,000 centers were opened during the last quar:er of 1989. TheGovernment will continue to provide adequate budget and priority tothe program, and will open centers according to an agreed timetable.The target for 1990 is 7,700 new centers; and 10,800 for 1991. Anevaluation of the program will be completed by the Ministry of theFamily by August 31, 1991; the evaluation will be discussed with theBank by September 30, 1991; and agreed actions will begin to beimplemented by October 31, 1991.

-67- ANNEX 5Page 4 of 6

Financil and e-egent Policies

(e) The primary health care strategy will be strengtheted by proposingan increase in the relative budgetary share of the first two levelsof health care delivery, measured in accordance with a methodologyagreed with the Bank. The Minister of Health will propose to theappropriate budgetary authorities that this share out of theMinistry of Health budget be increased from 33 percent in 1990. to36 perceut in 1991, and to 40 percent in 1992;

(f) In order to establish adequate implementation arrangements forsocial programs, the Ministry of the Family is being reorganizedinto the Ministry of Social Development; and

(g) Studies to enhance planning and management capacity at theMinistries of Education, Health and the Family will be prepared andcompleted by each mLnLstry, with the financial and tecbnical supportof the Vorld Bank, by March 31, 1992; discussions with the Bank onthe findings and recommendations of the studies will be completed byJune 30, 1992, and agreed actLons will begin to be implemented byAugust 31, 1992.

Sincerely,

Dra. Karisela Padr6n Qyero Dr. Manuel Adrianza Gustavo RoosenMinistra de la Familia Kinistro de Sanidad inistro di Educacion

v Asistencia Social

ATTACH:S

-68 _

Page 5 of 6

SOCIAL aECTORS ACTI P to

OBJECTIVES/ERomsS RECENT ACTIONS ACT 11 TO SE ?AX

A. Eaoesat ECK= itelon of cmitment toagreea ts undr the SAL.

1. titionatl Grants POM has gIven grants to about Evaluate targtitng. Evatuation will be coapteted1.7 mllion chiltdren, effectfvisa, " murt, by AUgut 31, 1991;contributfng to Incressd an entf fir. sptnatfon discussion of eatuatIon toschoot attendance. Ceod of the progrm for another be capltted by September 30,targetifng to poow ar. yAW. 1991; agreed ctions to begin

by October _1, 1991.

Program extended to cover atleast the 1990/91 school yar.

2. Maternat-Child teotth Care Pilot program with 10 health Cradualty e2pand coverage To 1S states before March 31,eonters operating successfutly throaughout th notional 1991; and to 23 states beforeIn Trujillo since December territory. December 31, 1991.199. Legal requirienets forPAYI Foundatson finalitzedMarch 1990.

3. Schoot feedine Praert Consultant is preparing Finalitze propsal. Proposal to be cotpleted byproposal for school lunch NOE and sant to the Sank byprogram for primary school Jue 30, 1991; discussien ofstudents. propsal to be eompoleted by

Ausust 31, 1991; setionsagred to take effect duringthe 1991/92 sdhool year.

4. Direct Implementation has bteen Continw to provide Target for 1990 Is 7,750 ewStransferm d to the Fundac1cn adequate bAdget wn centers; for 1991, 10,800.del ine and other non- priority to the program.governmental organiztions; GPM additifnal centers2,000 centers wer opened aewordinfg to ea ogreeddurfne the tast quarter of timetable.1989.

Condist an evaluation of Evaluation to be cotploted bythe program. MINFAN by Agust 31, 1991;

discussfon of evauataon tobe completed by September 30,1991; actifas agroed to beginby October 31, 1991

-69- AIN 5Page 6 of 6

5. FiNeANIACL POLICIES

1. Streothen orefurCt ealth The retative share of tho Further increas the To reach 36X by Jwa ry 1,carm firt two lteve of primsy retative shwa ct the first 1991, ad MM by Jwary 1,

heatth care delvery out of two tets of hltoh care 1992.the MNt budget was 3 in delivvy "ervces out of1990. the MN buidgt, easswed in

accordance with agreedmthdottogy.

C. q!HAGEMt

1. As1lo rtetAt Nutritfon speciatlista have Nutritln specialiets wltt By Narch 31, 1991.reonsbibfitv for been appointed In eight states be a*stgned to cover 23nutritionat service at by the MN, to be responsibte states; and al states wttlthe state tlvel. for the supervisfon of have nutrionists

nrutrtionat poticies sd responsibte for abutoteryaction. heatth centers.

2. Establish edeouete FOwVIS and the PANt 8nd Coptlte, the conversfan of Conctinufng process.ItoeU ntsAlon PREUSCXlAR Fourdations were the Ninistry of the Famityarrarcmernts fr sfcialt created to str3eamin, to Ministry of SociatrPiects. operation of project. Oevetopment ond establish a

Ministry of the Failty Is unit to deseIn, ptan anrdbeing reorganfied Into a mnitor socist progrms.Ministry of Sotal

Deveopent.

3. Pravide incentive msures itural internship provided for The Goverroent will conduct MN study by March 31. 1992;to attract end retain nw doctors. University a study to design an action discussofns to be coapletedoustif ld staff for the curriculum is being od1fled plan to attroct and retain by Jue 30, 1992; agreederimrv heelth care to hightlght the priemry qultlfied staff for th actlons to begin by AuSutstrateov. heatth care strategy. first two levets of heatth 31, 1992

car serice.

4. Enhance Dtolane andmanagement cgofcitv at the Proposats are being pr pared Firnlize studies. Studies to be compteted by

Ministrfes of Education with the betp of consuttants. each minfstry by March 31.Nes1th and tht oulfv. 1992: discusslons en the

finding ad recummundationsof the studies to becawpleted by Jun 30, 1992;ogreed octios to begin byAbqat 31, 12.

Oct. 10, 1990

VENEZUEASOCIAL DEVELOPMN PROJECT

Bs

ProJect Copoanmts by Year

Total..... ....... ..................................

1990 1991 1992 1993 1994 1995 Be URE

A. PRIlARY HEALTN CARE1. MCI AND NUTRITION 434.2 1185.4 1767.0 1880.3 1274.3 1069.9 7611.2 152.22. PRIMRY ELTH CARE 12.5 447.8 452.2 44.8 18.8 18.8 1398.2 28.03. COaIU TY PARTICIPATION 10.0 37.7 S1.2 S6.3 54.3 53.9 263.3 5.3

... & ......................... ..........................

Sib-total 456.7 1671.0 2270.4 2384.4 1347.S 1142.6 9272.7 185.5B. PRE-SCHOL DEVELOPNT

1. FORMAL 0.0 254.4 300.2 406.0 410.1 410.1 1780.8 35.62. INFO"ML 16.S 42.8 62.0 70.2 70.6 70.6 332.8 6.73. PRESCHOOL DEV. F _M T 0.9 2.6 2.5 2.5 2.5 2.5 13.5 0.3

................................................................... s

Sub-total 17.4 299.8 364.7 478.8 483.2 483.2 2127.1 42.5 SC. INFORMATION, EKCE COM 0.0 186.2 111.2 111.2 111.2 111.2 631.1 12.60. INSTITUTIONAL DEVELOPNT S.8 41.0 57.5 28.6 28.2 28.1 189.3 3.8

..........................................................................Total SASELINE COSTS 480.0 2198.0 2803.9 3003.1 1970.1 1765.1 12220.2 244.4

P"yscat Contingencies 24.0 109.9 140.2 150.2 98.5 88.3 611.0 12.2Price Continencies 67.9 m.9 1571.9 2183.1 1822.1 1973.4 8398.3 64.3

.........................................................................Total PROJECT COStS 571.8 308.9 4516.0 5338.3 3890.7 3826.8 21229.5 320.9

Taxes 0.0 0.0 0.0 0.0 0.0 0.00 0.0 0.00FoNig{n Exwe 133.4 1341.6 1607.a 1649.8 886.1 885.1 603.8 99.8

.........................................................................................................

Valwes Sutad b 1010000.0 10/24/1990 12s52

II uSbN

VENEZIELASOCIAL OEWELOPItNT PROJECTProjects Cacponenta bY Year

Totals Inctluding tontingenIes Totals Including Contingenlies

as USS,..................................................................................................

................................................................

1990 1991 1992 199 1994 199S Totat 199 1 1 199 1994 1995 Total

A. PRItRY NEALIt CAR£1. tCN AND NUTRITION S17.6 1707.5 2901.0 3406.8 2S32.0 2335.6 13400.5 10.0 29.3 45.4 50.7 36.0 31.4 202.0

2. PRIM"RY EAtLTH CARE 14.9 S89.6 675.6 728.9 36.6 40.2 2085.9 0.3 10.1 10.6 10.9 0.S O.S 32.9

3. COPMtTT PARTICIPATION t1.8 52.5 81.1 100.2 106.0 15.S 466.9 0.2 0.9 1.3 1.5 1.5 1.6 6.9

Sub-total 544.2 2349.6 3657.7 4235.9 2674.6 2491.3 15953.3 10.5 40.S ST.2 63.1 38.0 33.5 214.6

B. ME-SciOMu DEVLOPNMEt "

1. FORMAL 0.0 364.4 489.1 79.8 808.2 888.0 3279.5 0.0 6.2 7.6 10.9 11.S 12.0 48.2

2. INFORA L 19.7 1.3 102.4 127. 140.a 154.7 607.4 0.4 1.1 1.6 1.9 2.0 2.1 9.0

3. PRESCMl DEV. MAMIUNT 1.1 3.7 4.0 4.4 4.8 S.3 23.2 0.0 0.1 0.1 O.t 0.1 0.1 0.4

..... . ... i ...... ;:..... ... ... i............:.... ;..... ....................................................... _ .........................................................

Sub-Total 20. 430.3 S95.5 861.6 953.6 101.0 3910.1 0.4 7.4 9.3 12.8 13.6 14.1 S7.6

C. INFORMATION EDUCE COIm 0.0 249.S 173.1 189.1 206.4 226.4 1044.S 0.0 4.3 2.7 2.6 2.9 3.0 15.6

0. INSTITUTIONAL DEVELOPMENT 6.8 56.4 89.7 S1.6 SS.9 61.2 321.6 0.1 1.0 1.4 0.8 0.8 0.6 4.9

................... ............................................................. ...... I..........................................................

total PROJECTS COSTS S57.8 308S.9 4516.0 5338.3 3890.7 3826.8 21229.S 11.0 52.9 70.6 79.S 55.3 51.5 320.9

maDam flaUuUaaUauaaaaa_nDa_ ma Da UDaU

..............................................................................................................................................

Values Staled by 100000.0 10124/1990 12:52

IND 0.

VENEZUELASOCIAL DEVELOPMENT PROJECTSuwary Accounts by Year

Totals Including Contingencies Totalt Including Contingencleses US$

1990 1991 1992 1993 1994 1995 Total 1990 1991 1992 1993 1994 1995 Total

1. INVESTMENT COSTS....................

A. FURNITURE 0.0 24.2 27.1 29.6 32.4 35.6 148.9 0.0 0.4 0.4 0.4 0.5 0.S 2.2B. CIVIL WORKS 10.2 227.1 257.4 281.9 303.5 333.2 1413.2 0.2 3.9 4.0 4.2 4.3 4.5 21.1C. EQUIPMENT 2.7 m.0 858.8 700.3 5.0 5.5 2349.4 0.1 13.3 13.4 10.4 0.1 0.1 37.40. FOO 488.6 1490.2 2701.1 3335.5 2439.6 2234.1 12689.1 9.4 25.5 42.2 49.7 34.7 30.1 191.6E. FOREtGN CONSULTANTS 13.8 10.7 6.5 6.3 6.4 7.0 50.6 0.3 0.2 0.1 0.1 0.1 0.1 0.8F. TECM. ASSIST. AND STIES 11.4 52.3 69.2 as.7 97.4 106.9 422.9 0.2 0.9 1.1 1.3 1.4 1.4 6.3G. OVERSEAS TRAINING 0.2 0.4 0.4 0.5 0.3 0.1 2.0 0.0 0.0 0.0 0.0 0.0 0.0 O.0N. DOWESTIC TRAINING 24.6 81.5 108.1 140.6 160.1 175.1 690.0 0.5 1.4 1.7 2.1 2.3 2.4 10.3 .1. INSTRUCTIONAL NATERIALS 1.1 21.1 24.8 27.2 29.8 32.7 136.6 0.0 0.4 0.4 0.4 0.4. 0.4 2.0 tJJ. CWoKNICATIONS SERVICES 0.0 209.1 127.2 138.8 151.3 165.8 792.2 0.0 3.6 2.0 2.1 2.2 2.2 12.0Total INWVESTMENT COSTS 552.4 2893.6 4180.6 4746.4 3225.8 ;OS6.0 18694.9 10.6 49.6 65.4 70.7 45.9 41.7 283.9

II. RECURRENT COSTS...................

A. OPERATION AND MAINTENANCE 17.1 167.3 298.0 550.8 619.8 681.3 2334.3 0.3 2.9 4.7 8.2 8.8 9.2 34.0B. COXSUXABLE MATERIALS 2.3 25.0 37.4 41.0 45.0 49.5 200.3 0.0 0.4 0.6 0.6 0.6 0.7 3.0Totat RECURRENT COSTS 19.4 192.3 335.4 591.9 664.9 730.8 2534.7 0.4 3.3 5.2 8.8 9.5 9.8 37.0

Total PROJECT COSTS 571.8 3085.9 4516.0 5338.3 3890.7 3826.8 21229.5 11.0 52.9 70.6 79.5 55.3 51.5 320.9....................................................................................................................................................................

Values Scated by 1000000.0 10/24/1990 12:52

0A-

VENEZUEtASOCIAL DEVELOPHEWT PROJECT

Somre Account by Project Coeponentes

COMMJUIT PRESCKOO INFORMAl INSTITUT Pysical Price

MCN AND PIMIARY T L DEV. ION, tOAt ContingenieIs Contingenc es

NUTRITIO HEALTH PARTICIP AIRAGENE EUC, D.-WLOPN .......

Y CARE AllOW FORKAL INFORMAL NT ComSUm ENT Total X Amount X Amount

1. lNVESTMENT COSTS....................

A. FURltITURE 0.0 0.0 0.0 73.9 10.5 0.2 0.0 0.0 84.7 5.0 4.2 70.9 60.0

B. CIVIL WORKS 36.7 0.0 0.0 731.1 38.9 0.0 0.0 0.0 806.6 5.0 40.3 70.2 566.3

C. EQUIPMENT 241.3 1291.4 25.7 0.0 0.0 0.3 0.0 50.8 1609.5 5.0 80.5 41.0 659.4

0. FOOD 7155.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7155.6 5.0 357.8 72.3 5175.7

E. fOREIGN CONSULTANTS 21.6 0.0 0.0 04t 0.0 0.0 12.3 2.5 36.4 5.0 1.8 34.1 12.4

F. TECH. ASSIST. AID STUDIES 41.6 44.3 100.3 0.5 0.0 9.7 20.5 27.1 244.0 S.0 12.2 68.3 166.6

G. OVERSEAS TRAIlING 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 1.3 5.0 0.1 42.3 0.6

. DOMESTIC TRAINING 98.2 61.3 79.5 7.6 20.4 0.0 108.4 4.6 380.1 5.0 19.0 76.5 290.9

1. INSTRUCTIONAL MATERIALS 0.0 0.0 6.7 61.7 7.6 0.0 0.0 0.0 75.9 5.0 3.8 74.9 56.9

J. CSmLWICATIONS SERVICES 0.0 0.0 0.0 0.0 0.0 0.0 489.9 0.0 489.9 5.0 24.5 56.7 277.8

Total INESTWMENT COSTS 7594.9 1397.1 212.2 874.8 77.4 10.2 631.1 86.3 10864.1 5.0 544.2 66.8 7266.6

II. RECURRENT COSTS...................

A. OPERATION AND MAtITENUACE 14.8 1.1 44.9 834.5 237.1 2.6 0.0 91.4 1226.4 5.0 61.3 85.3 1046.6

S. CONSUJABLE MATERIALS 1.4 0.0 6.1 71.6 18.2 0.8 0.0 11.6 109.7 5.0 5.5 77.6 85.1

..................................................;............:......................................................................

total RECURRENT COSTS 16.3 1.1 51.1 906.0 235.4 3.3 0.0 102.9 1336.1 5.0 66.8 84.7 1131.7

Total BASELINE COSTS 7611.2 1398.2 263.3 1780.8 332.8 13.5 631.1 189.3 12220.2 5.0 611.0 68.7 8398.3

Physical Contingencies 380.6 69.9 13.2 89.0 16.6 0.7 31.6 9.5 611.0

Price Contingencies 5408.7 617.8 190.5 1409.6 258.0 9.0 381.8 122.9 8398.3 4.8 399.9

,....... ;............;.........;......... ............. .......... i.......... .............................................................

Toral PROJECT COSTS 13400.5 2085.9 46.9 3279.5 607.4 23.2 104.5 321.6 21229.5 4.8 1010.9 39.6 6398.3

Taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Foreign Exchange 2857.4 1761.7 162.5 829.9 111.6 9.4 649.4 121.8 6503.8 4.8 309.7

...............................................................................................................................................

..................................................................................

Values Staled by 1000000.0 10/24/1990 12:52

flb

- 74 -

ANNEX 7

VENEZUELASOCIAL DEVELOPMENT PROJECT

Project Implementation Schedule(Cumulative Progress In %)

Prolect Component 1990 1991 1992 1993 1994 1995

Fumiture 0 16 34 54 76 100CMI Works 1 17 35 55 76 100Equipment 0 33 70 100 10C, 100Food 4 16 37 63 82 100Foreign Experts 27 48 61 74 86 100Local Experts 3 15 31 51 75 100Overseas Training 11 32 53 79 95 100Domestic Training 4 15 31 51 75 100Instructional Materials 1 16 34 54 76 100IEC Services 0 26 42 60 79 100Operation and Maintenance 1 7 20 43 70 100Consumable Materials 1 14 32 53 75 100

Overall 3 17 38 64 82 100

_ 75 -

ANNEX 8

VENEZUELASOCIAL DEVELOPMENT PROJECr

Key Indicators of Project Implementation

Indicators 1990 1991 1992 1993 1994 1995

Health Servce Coverage TargetsPre-Natal Women 207,000 246,000 279,000 317,000 361,000 422,000Post-Natal Women 80,000 120,000 169,000 226,000 277,000 359,000Infants (up to 24 months old) 245,000 310,000 376,000 445,000 531,000 641,000Preschool Children (2-6 years old) 371,000 425,000 532,000 644,000 777,000 916,000

Famiy Planning 40,000 66,000 101,400 146,900 193,900 251,300Breastfeeding for 6 months 25% 30% 35% 40% 45% 50%Cervkal Cancer Screening 180,000 225,000 250,000 285,000 325,000 375,000Immunization Coverage (for

chridren under three) 70%/ 80%/0 85% 85% 90% 90%

IECMass Media Campalgns/year 2 5 5 5 5

Preschool DevelopmentNew Classrooms (formal system) 423 361 361 361Non-formal Centers Opened 59 45 45 35Increased Attendance-Formal 20,500 21,600 21,600 21,600Increased Attendance-Non-forma 8,580 6,480 6,480 6,480

- 76 -

Page 1 of 2

SOCIAL pEVE_LOPENT PROJECT

Selected Documents and Data Available in the Project File

A. Selected Reports and Studies Related to the Subsector

A.1 "The Recent Evolution of Public Expenditure in Education, Healthand Housing in Venezuela; Gustavo NArquez, IESA, Caracas, January1990.

A.2 "El Presupuesto de 1990 y la Estrategia para el Enfrentamiento dela Pobreza", Hayd6e Garcia, Caracas, November 1989.

A.3 Informe Social 3:1986. Sistema de Indicadores Sociales para unDiagn6stico Permanente, CORDIPLAN, Caracas, 1986.

A.4 'El Gasto Publico Social en Venezuela," Haydee Garcia, Caracas,1988.

A.5 "Plan de Acci6n Social para 1989", CORDIPLAN, 1989.

B. Selected Regorts and Studies Related to the Project

B.1 "Plan de Accion Alimentario Dirigido a la Poblaci6n Vulnerable enPobreza Critica", Eduardo Atalah, Eduardo Beltran, MNximo Boschand Antonio Infante, 1989.

B.2 "Programa Alimentario Materno Infantil, Informe Trimestral, PlanPiloto, Distrito Bocon6", March 1990.

B.3 "Programa Centros del Nifto y la Familia, Informe Enero-Diciembre1987", Universidad Metropolitana y Fundaci6n Bernard van Leer, May1989.

B.4 'Proyecto Enfrentamiento a la Pobreza, Proprama Materno-InfantilPAM!K, September 1989.

B.5 'Componente de Informaci6n, Educaci6n y Comunicaci6n, Reporte dela Consultoria de Evaluaci6n", Mario Bravo, May 1990.

B.6 "Proyecto Fxpansi6n de Cobertura del Nivel de Educaci6n Preescolaren Venezuela Afho 1991-1994", Ministerio de Educaci6n, Caracas, May1990.

B.7 "Proyecto de Desarrollo Social - Propuesta de Organizaci6n",Gobierno de la Rep4blica de Venezuela, June 1990.

- 77 -

Page 2 of 2

B.8 MProy.cto de Desarrollo Social - Principales Ra8gos., tlinsterlode la Familia, July 1990.

C. Ps~1L.aa

CA.1 Venezuola: Public Sector Investment Review: Health andSducation", Ruben 1M. SuArez, February 1990.

C.2 Social Spending in Venezuela"' Michelle Riboud, 1989.

C.3 ONutrition in Venezuela", Fernando Vio, 1988.

- 78 -

CHR 1

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

MINISTRY OF NEALTH

ORGANIZATIONAL STRUCTURE

M4INISTER

MOATRNA OOOOFEPDMO

DIRECTORS

DIRECTORATEGENERAL

HEALTH SECTOR

PERK4NENT* v : PRIMARY HEALTH

. ~~~CARE; . ~COMaISSION

REGION

- 79 -

CHART 2

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

ORGANIZATIONAL STRUCTURE

MINISTRY OF HEALTH|DIRECTORATE GENEftALt

FOUNDATION BOARD OFDIRECTORS

ADVISORYE GROUP

|EXEC 'TVE|DIRECTOR l

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ADMINISTR- TECHNICALTION |CORDINATION

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- 81 -

CHART 4

VENEZUELA

SOCIAL DEVELOPMENT PROJECT

MINISTRY OF THE FAMILYITECHNICAL COORDINXTION OFFICE

ORGANIZATIONAL STRUCTURE

MINISTEROF THEFAMILY

FONVIS DIRECTORATEOF

ADMINISTRATION

l TECHNICAL!--- - COORDINATIONOFFICE

ADMINISTRATION INFORMATION HEALTHAND EDUCATION

FINANCE CONMUNICATIONS

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VENEZUELA 20 A4 K I C A

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