THE WORLD BANK IBRD* IDA I WmLBNKOROup - OFFICIAL ALBERTO RODRIGUEZ Director Bolivia, Chile, Ecuador, Peru and Venezuela DOCUM ENTS June 7, 2017 His Excellency Mr. Alfredo Thorne Minister of Economy and Finance Ministry of Economy and Finance Jir6n Junin 319 Lima, Peru Excellency, Re: Peru: Basic Education Project (Loan No. 8226-PE) Second Amendment to the Loan Agreement We refer to the Loan Agreement between the Republic of Peru ("Borrower") and the International Bank for Reconstruction and Development ("Bank"), dated July 1, 2013 ("Loan Agreement") as amended, with respect to the above-captioned Project. Please note that capitalized terms used in this letter ("Amendment Letter") and not defined herein have the meaning ascribed to them in the Loan Agreement. We are pleased to inform you that pursuant to your request dated April 12, 2017, the Bank hereby agrees to amend the Loan Agreement as follows: 1. Article 3.01 to the Loan Agreement is hereby amended to read in its entirety as follows: "3.01 The Borrower declares its commitment to the objective of the Project and the Program. To this end, the Borrower shall carry out the Project, through MINEDU, with the overall technical coordination of SPE, and with the assistance of: (i) UMC for Part 1 of the Project; (ii) DEI and OSEE for Part 1(b) of the Project jointly with UMC; (iii) OSEE, DIGEDD and DIGC for Part 2 of the Project; and (iv) UE 118 for Part 3 of the Project, all in accordance with the provisions of Article V of the General Conditions." 2. Section IV.C.2 of Schedule 2 to the Loan Agreement is hereby amended to read in its entirety as follows: Av. Alvarez Calder6n 185, Piso 7, San Isidro, Lima 27, Peri Telf. (511) 622-2300 "2. If the Bank has not received evidence of full compliance with the DLIs listed in Schedule 5 to this Agreement, in respect to any Loan withdrawal under Category (1) (as referred to in the Operational Manual and additional instructions referred to in Section IV.A. 1 of this Schedule), then: (a) the Bank shall disburse the Loan amount of the corresponding withdrawal attributable to each DLI, in proportion to the respective degree of execution of each DLI and in accordance with additional instructions referred to in Section IV.A.1 of this Schedule; (b) the Borrower, through MINEDU, shall prepare and furnish to the Bank a satisfactory time-bound action plan to achieve such DLI or DLIs in a manner satisfactory to the Bank; and (c) as soon as the Bank is satisfied that said action plan has been implemented, the Bank shall authorize the withdrawal of unwithdrawn Loan amount by which the corresponding Loan withdrawal had been reduced in the withdrawal period following the date of implementation of said action plan, all as further detailed in the additional instructions referred to in Section IV.A.l of this Schedule." 3. Section IV.C.3 of Schedule 2 to the Loan Agreement is hereby deleted in its entirety. 4. Schedule 4 is hereby amended to read in its entirety as set forth in Annex 1 to the Amendment Letter. 5. Schedule 5 is hereby amended to read in its entirety as set forth in Annex 2 to the Amendment Letter. 6. Section I of the Appendix to the Loan Agreement is hereby amended to modify the following definitions: ""Amendment Letter" means the agreement entered into between the Borrower and the Bank to amend this Agreement, dated June 7, 2017." ""Basic Education" means pre-primary, primary, secondary, special, alternative and technical-productive education." All other provisions of the Loan Agreement, except as amended in this Amendment Letter, shall remain in full force and effect. Please confirm your agreement with the foregoing, on behalf of the Borrower, by signing and dating the two originals of this Amendment Letter, and returning one fully executed original to us. The provisions set forth in this Amendment Letter, including its Annexes, shall become effective as of the date of the countersignature upon receipt by the Bank of one fully executed original of this Amendment Letter. Please also note that the Restructuring Paper dated June 7, 2017 shall be disclosed on the Bank's external website. Sincerely, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Alberto RodrigAez Director Bolivia, Chile, Ecuador, Peru and Venezuela AGREED: REPUBLIC OF PERU By: /Auth ep etative VALENTIN COBElAS AQUINO Name: Director General (e) Dreccir General oe Endewdamlnto y Tesoro Pblico Title: Date: 0 7 JUL 2017 Annex 1 SCHEDULE 4 Eligible Budget Activities (Expressed in thousand Nuevos Soles) Budget Responsible Project components Activity Units 2014 2015 2016 2017 Total code I Evaluating student learning 50.78 84,140.43 98,514.70 107,311.19 290,017.10 (a) Student Census Assessment (ECE) 5000244 UMC 50.78 71,513.92 76,601.59 84,679.89 232,846.18 National sample evaluations 5000252 UMC 20,331.91 22,631.30 42,963.21 (b) Assessment of preschool students and quality of 5003145 DEIOSEE services 332.90 1,449.85 1,782.75 (c) Participation in international assessments 5000253 UMC 12,293.61 131.35 12,424.96 2 Evaluating instructional practice and school leadership 42,709.65 196,972.28 129,206.79 368,888.72 (a) Monitoring learning opportunities in the classroom 5003146 OSEE 1,163.00 1,161.60 878.46 3,203.06 DIGEDD/ (b) School principal evaluation system 5004409 DIGC 39,226.65 167,010.68 75,128.33 281,365.66 (c) Teacher performance evaluation 5003128 DIGEDD 1,550.00 24,750.00 51,250.00 77,550.00 (d) Design of the evaluation system to determine merit- 5004410 DIGEDD based promotions within the Teaching Career 600.00 2,350.00 1,650.00 4,600.00 (e) Design of the evaluation system to determine merit- 5003109 DIGEDD based entrance to the Teaching Career 170.00 1,700.00 300.00 2,170.00 3 Strengthening MINEDU implementation capacity 271.01 2,014.30 1,858.81 1,930.81 6,074.93 (a) Program management 5000276 UE 118 271.01 2,014.30 1,858.81 1,930.81 6,074.93 TOTAL 321.79 128,864.38 297,345.79 238,448.79 664,980.75 -4- Annex 2 SCHEDULE 5 DLI# Indicator Baseline 2013 2014 2015 2016 2017 School management positions staffed through the school principal evaluation 0 0 15,000 0 0 3000 system 2 Student assessments for new grades of Primary Education and Secondary 0 2 2 0 0 0 Education levels validated in a pilot study 3 Additional grades at the Primary Education and Secondary Education levels in 0 1 0 1 1 0 which sound national assessments are administered in at least two subject areas. 4 Results of national student assessments in new grades at the Primary Education 0 0 0 1 1 1 and Secondary Education levels reported at the regional and school level. 5 National surveys carried out to evaluate child development progress and the 0 0 1 0 0 1 quality of public Pre-primary Education services. Participati Participat Borrower's (through MINEDU) participation in international assessments of on in Pari ion in student learning outcomes PISA TERCE PISA and 2012 ICCS National studies of classroom instructional practice in Primary Education and/or I I 1 0 0 Secondary Education levels, as the case may be. 8 Results of national studies of classroom instructional practice reported at the 1 1 0 2 1 0 national level. 9 School principals certified in school management nationwide 0 0 0 0 0 10,000 -5-