Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 47874-AR PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN INTHEAMOUNT OFUS$450MILLION TO THE ARGENTINE REPUBLIC FOR A BASIC PROTECTION PROJECT May 4,2009 HumanDevelopment Sector ManagementUnit Argentina, Chile, Paraguay and Uruguay Country Management Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective May 4,2009) Currency Unit = Argentine Peso AR$3.6965 = US$l FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities AAFF Asignaciones Familiares (Family Allowances) ADP ANSES' PersonsAdministration Database AFIP Administracidn Federal de Ingresos Pziblicos (Public Income Federal Administration) AFJP Administ+adora de Fondos de Jubilaciones y Pensiones (Private Pension FundManager) AGN Auditoria General de la Nacidn (National Audit Agency) ANSES Administracidn Nacional de la Seguridad Social (National Administration o f Social Security) APL Adaptable Program Loan BCRA Banco Central de la RepziblicaArgentina (Central Bank) CAS Country Assistance Strategy CCT Conditional Cash Transfer CEDLAS Centros de Estudios Distributivos y Laborales, UniversidadNacional de La Plata CFAA Country Financial Accountability Assessment CIC Centro Integrador Comunitario (Community Integration Center) CPI Consumer Price Index CPS Country Partnership Strategy CPyPE Coordination of Especial Programs and Projects CQS Selection Basedon Consultant's Qualifications CUT Cuenta Unicadel Tesoro (Single Treasury Account) DA DesignatedAccount DDJJ Declaraciones Juradas de 10s Empleadores (Employers' Social Security reports) DNPOIC Direccidn Nacional de Proyectos con Organismos de Cre`dito Internacional (National Directorate of Projects with International Credit Organizations) DO Development Objective EO Employment Offices EPH EncuestaPermanente de Hogares (Permanent Household Survey) EPPS Encuesta de Percepciones de Politicas Sociales (Perception of Social Plans Survey) .. 11 FOR OFFICIAL USE ONLY FAP Fiduciary Action Plan FM Financial Management FMR Financial MonitoringReport FMS Financial Management Specialist FMSB Financial Management Sector Board GDP Gross Domestic Product GOA Government of Argentina HHT Heads of Household Transition Project IADB InterAmerican Development Bank IAU Internal Audit Unit IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report ICT Informationand Communications Technology IDA International Development Association IF1 International Financial Institutions IFR InterimFinancial Reports INDEC Instituto Nacional de Estadisticay Censos (National Instituteof Statistics and Census) IP Implementation Progress IPP Indigenous Peoples Plan IPPF Indigenous Peoples Planning Framework ISDS Integrated Safeguards Data Sheet ISR Implementation Status Report LAC Latin America andthe Caribbean Region LAF Ley de Administracidn Financiera (Financial Management Law) LCS Least Cost Selection M&E Monitoringand Evaluation MEPF Ministry of Economy and Public Finance MIS Management Information System MSD Ministry of Social Development MTESS Ministerio de Trabajo, Empleo y Seguridad Social (Ministry of Labor, Employment and Social Security) NCB National Competitive Bidding NGO Non-Governmental Organizations NPA National Public Administration OECD Organization for Economic Cooperation and Development O M Operational Manual OP Operational Policy PAD Project Appraisal Document PAYG Pay As You Go PCN Project ConceptNote PFM National Public Financial Management PID Project InformationDocument QBS Quality Based Selection QCBS Quality Based Selection of Consultants This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. SBD StandardBiddingDocuments SEPA ProcurementPlans Execution System SIDIF Integrated Financial Management System SIGEN Sindicatura General de la Nacidn (General Syndicate of the Nation) SIJP SistemaIntegrado de Jubilaciones y Pensiones (National Pension System) S I L Specific Investment Loan SINTyS Sistema de Informacidn Nacional Tributariay Social (National System of Tax and Social Identification) SOE Statementof Expenditures sss Single Source Selection TA Technical Assistance TGN Tesoreria General de la Nacidn (National Treasury Office) TOR Terms of Reference UEC Central ExecutingUnit UEPEX Argentina Budget Execution Software for Multi-Lateral Lending Operations UNDP UnitedNations Development Program UTDT Universidad Torcuato Di Tella Vice President: PamelaCox Country Director: Pedro Alba Sector Manager: Helena Ribe Task Team Leader: Rafael P. Rofman iv ARGENTINA Basic ProtectionProject CONTENTS Page A.STRATEGIC CONTEXT AND RATIONALE ..................................................................... 1 1. Country and sector issues .................................................................................................... 1 2. Rationale for World Bank involvement............................................................................... 7 3 . Higher level objectives to which the project contributes .................................................... 9 B PROJECT DESCRIPTION . ................................................................................................... 10 1. Lendinginstrument............................................................................................................ 10 2. Project development objective and key indicators ............................................................ 10 3 . Project components ............................................................................................................ 11 4. Lessons learned and reflected inthe project design.......................................................... 15 5 . Alternatives considered and reasons for rejection............................................................. 16 C IMPLEMENTATION . ............................................................................................................ 17 1. Partnership arrangements .................................................................................................. 17 2 . Institutional and implementationarrangements ................................................................ 18 3. Monitoring and evaluation of outcomes/results ................................................................ 19 4. Sustainability ..................................................................................................................... 19 5. Critical risks and possible controversial aspects ............................................................... 20 6 . Loadcredit conditions and covenants .............................................................................. -22 D APPRAISAL SUMMARY . ..................................................................................................... 23 1. Economic analysis ............................................................................................................. 23 2. Technical ........................................................................................................................... 25 3. Fiduciary............................................................................................................................ 25 4. Social Assessment and Safeguards.................................................................................... 26 5. Environment ...................................................................................................................... 27 6. Safeguard policies.............................................................................................................. 27 . . 7. Policy Exceptions and Readiness ...................................................................................... 29 Annex 1: Country and Sector or ProgramBackground .......................................................... 30 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies ..................52 V Annex 3: Results Frameworkand Monitoring ......................................................................... 53 Annex 4: DetailedProjectDescription ...................................................................................... 58 Annex 5: ProjectCosts ................................................................................................................ 65 Annex 6: Institutionaland ImplementationArrangements .................................................... 66 Annex 7: FinancialManagementand DisbursementArrangements ..................................... 71 Annex 8: ProcurementArrangements ....................................................................................... 82 Annex 9: Economic Analysis ...................................................................................................... 88 Annex 10: Social Assessment ...................................................................................................... 97 Annex 11:Project Preparationand Supervision .................................................................... 112 Annex 12: Documents in the ProjectFile ................................................................................ 113 Annex 13: Statementof Loansand Credits ............................................................................. 114 Annex 14: Country at a Glance ................................................................................................ 117 Annex 15: Map IBRD 33362 ..................................................................................................... 120 vi ARGENTINA BASIC PROTECTION PROJECT PROJECT APPRAISAL DOCUMENT LATIN AMERICA AND CARIBBEAN LCSHD-DPT Date: May 4,2009 Team Leader: Rafael Rofman Country Director: Pedro Alba Sectors: Other social services (100%) Sector ManagedDirector: Helena G. Ribe Themes: Social safety nets (P) Project ID: P115183 Environmental screening category: C Lending Instrument: Specific Investment Loan [XI Loan [ ]Credit [ 3 Grant [ ]Guarantee [ 3 Other: For Loans/Credits/Others: 1,270.00 Total Bank financing (US$m.): 450.00 Proposedterms: Fixed-Spread Loan (FSL) in US Dollarsto be paid on eachJune 15 andDecember 15; beginningJune 15,2014 andto be fully repaidon December 15,2038. Borrower: Argentine Republic ResponsibleAgency: MinistryEconomy andPublic Finance Hip6lito Yrigoyen 250 Buenos Aires Argentina (5411) 4349-5515 2Y 2009 2010 2011 2012 lnnual 180.0 266.0 3.0 1.o hmulative 180.0 446.0 449.0 450.0 Project implementation period: June 15, 2008 - September 30, 2011 (including eligibility for retroactive financing) vii Expected effectiveness date: June 15,2009 Expected closing date: September 30,201 1 Does the project depart from the CAS incontent or other significant respects? Ref: PAD A.2. []Yes [XINO Does the project require any exceptions from Bank policies? Ref: PAD D.7 []Yes [XINO Have these been approved by Bank management? []Yes [XINO I s approval for any policy exception sought from the Board? []Yes [XINO Does the project include any critical risksrated "substantial" or "high"? Ref: PAD C.5 []Yes [XINO Does the project meetthe Regional criteria for readiness for implementation? Ref: PAD D.7 [XIYes [ ]No Project development objective Ref: PAD B.3, and TechnicalAnnex 3 The project development objective is to increase the effectiveness o fArgentina's income transfer programs for the unemployed and families with children, by improving selected designfeatures and the transparency and accountability o f the Family Allowances and Seguro Program, and by transferring beneficiaries from other, less effective schemes and programs, to the Family Allowances Program and the Seguro Program. Project description Ref: PAD B, and TechnicalAnnex 4 The proposed Project would be financed by a US$450 million Specific Investment Loan (SIL), to partly support implementation o f the Government's program during a period o f approximately one year. The project proposes to finance eligible social protection transfers, focusing on two programs that are considered core to the Government's social protection strategy: the Seguro program and the Family Allowances program, and eligible expenditures under a Technical Assistance component. The project will have three components. These will respectively support: (1) the provision o f Seguro grant; (2) the provision o f Family Allowances grants; and (3) a Technical Assistance component for monitoring, evaluation, and dissemination o f social protection programs. Which safeguard policies are triggered, if any? Ref: PAD D.6., TechnicalAnnex 10 The project triggers the Indigenous Peoples safeguard (OP/BP 4.10). Significant, non-standard conditions: None Ref: PAD C.6 Board presentation: N/A Loadcredit effectiveness: Re$ PAD D.7 The proposed project does not require any non-standard conditions for effectiveness. Covenants applicable to project implementation: 1. The Borrower will implement the project following the stipulations o f an Operational Manual (OM) acceptable to the Bank. The OM will include, inter alia, the project's ... V l l l institutional arrangements, eligibility criteria for Grants and Eligible Beneficiaries, and operational, accounting, procurement and disbursementprocedures. 2. Auditing SpecialRequirements:The Borrower, through the MTESS and ANSES shall ensure that the annual audits of the Project, carried out in accordance with terms of reference satisfactory to the Bank, will verify that the Seguro Beneficiaries and the AAFF Beneficiaries are eligible for receiving the Seguro Grants and the AAFF Grants as per the eligibility criteria of the Seguro Beneficiaries and the AAFF Beneficiaries. 3 , Safeguard Covenant: (i) The Borrower shall carry out, and shall cause the IPPF Entities to carry out the IPPF and prepare and carry out each IPP in accordance with such IPPF and IPP; and (ii)the Borrower shall prior to providing any SCE Grant inthejurisdiction of a Province or Municipality where the IPPF applies, enter into an agreementwith the respective Province and/or Municipality setting forth their respective obligations inthe implementation ofthe IPPF and IPPs. 4. Reporting Covenant: The Borrower shall monthly furnish to the Bank reports to verify the evolution of MonitoringIndicators discussedinAnnex 3 of the PAD, includinga report from ANSES on SUAF, a report from AFIP on the compensatory scheme of Family Allowances and the monitoring reports for Seguro. 5. Disbursement Conditions: The Bank will disburse up to 20 percent of the loan amount (US$90 million) to finance eligible retroactive expenditures. Disbursementsfor Grants after the loandisbursedUS$90 million from the loan account for Components 1and 2 will only be authorized when the Disbursement Indicators have reachedthe target levels indicated for the "first disbursement level" inthe table included in Section B.2 of the PAD. Disbursementsfor Grants after the loan disbursedUS$270 million from the loan account for Components 1 and 2 will be authorized when the Disbursement Indicators have reached the target levels indicated for the "second disbursement level" in the table included in Section B.2 of the PAD. There will be no disbursement conditions for Component 3. ix A. STRATEGIC CONTEXT AND RATIONALE 1. Countryand sector issues 1. Argentina faces a narrowing window of opportunity in social protection, at a critical time. Following the most serious economic crisis in its history in 2001-02, the country mobilizedan unprecedentedeffort to provide income support to the population in need. By early 2007 social indicators had recovered to pre-crisis levels with the resumption of growth, providing an opening for the Government to move from emergency income support programs to a more comprehensive, long-term and sustainable strategy for social protection. However, the opportunity to move towards a social protection system able to protect all poor families in an integrated way may prove fleeting as Argentina faces increasing fiscal pressures in the context of the global economic crisis. 2. In this regard, the Government's efforts to continue building a strong and inclusive safety net will be critical. Poverty in Argentina remains high, at around 20 percent - with rates significantly higher in poorer regions - indicating the need for a strong safety net. Similarly, income inequality has declined in recent years, but it is still higher than the early 1990s levels, with a Gini coefficient of 0.48-0.50 in 2008, and Argentina's ranking in Latin America has deteriorated in this area. Unemployment has declined from the peak of 20 percent in 2002, during the crisis, to below 10 percent in 2008. However, there are concerns that unemployment may rise as a result of a slow down in economic growth in 2009. As past experience has shown, informal workers would be particularly vulnerable to labor market adjustments during a downturn. 3. Argentina's growth has been strong. In 2007, the economy grew by 8.7 percent, the fifth straight year of 8-9 percent growth since the financial crisis of 2001-2002. The recovery was supported by a strong domestic demand, including a dynamic expansion in investment spending since 2003, improved fiscal performance and favorable terms of trade (high commodity prices), particularly since 2006. Twin surpluses (fiscal and external) allowed the country to accumulate foreign reserves and reduce the debt burden. The four-month farm conflict that erupted in March 2008 took a toll on the economy, although growth kept its momentum until the second half of 2008 when the global economic crisis began to affect more strongly Argentina. The conflict increased economic uncertainty which inturn ledto a surge of capital outflows andpressures on the currency, increases indomestic interest rates and a decline inpeso-denominateddeposits. The central bank acted promptly and stabilized the exchangemarket and banking system. A second wave of financial sector stress resulted from the deepening of the global financial crisis and the October announcement of the nationalization of the private pension funds, but stability has now returnedafter intervention by the central bank. More generally, market confidence has also been eroded by concerns over inflationary pressures that surfaced in 2007, the increasingly unfavorable external environment, higher financing needs, and uncertainty over the global macroeconomic outlook and the course of domestic economic policies. 1 4. Over the next eighteen months, Argentina will have to weather the global economic crisis. The main transmission channel i s trade, since Argentina's fiscal and external positions remain vulnerable to swings in commodity and manufactured export volumes and prices. Given the uncertainty over the global macroeconomic outlook and the direction of economic policies, the Government has a limited margin to use countercyclical policies. On the monetary front, with rapid exchange rate depreciation in neighboring countries the real exchange rate lost competitiveness as the central bank implementeda policy of more controlled depreciation to contain financial volatility and inflationary pressures. Fiscal accounts are deteriorating although the government will likely manage to keep fiscal primary surpluses if growth of primary expenditures is contained. In addition, the global crisis has increased risk aversion, and that implies that Argentina will continue to have few financing options. While the Government will likely be able to meet its financing needs during 2009, Argentina's economic outlook in 2010 would be challenging if world economic conditions do not improve. At the same time, a large stock of reserves and the primary fiscal surplus would help mitigate the negative impact of potential economic shocks. 5. Currently, the Government's social protection programs are mainly linked to formal employment, with programs such as pensions and Family Allowances. Argentina's strategy of social inclusion has been clearly based on the labor market in recent years. After the introduction of the emergency workfare program Plan Jefes y Jefas (referred to as "Jefes") in 2002, most efforts have been focused on expanding the formal labor force and including workers inthe contributory social security system. As of late 2008, more than 4 million beneficiaries received pensions (up from less than 3 million in 2006). Family Allowances reach children of low and middle income workers, and it was estimated that nearly 5 million children were covered by this system in 2008. Other contributory programs, such as the traditional unemployment insurance scheme (first introduced in 1992) had limited coverage, mostly due to access restrictions (only formal workers fired from a private firm with at least 6 months of continuous contributions may apply). As of mid 2008, the Unemployment Insurance program had nearly 100 thousand beneficiaries, or approximately 7 percent of all unemployed workers. 6. Benefits under the Family Allowances program (Asignaciones Familiares - AAFF) reach nearly 30 percent of households in Argentina. Because the program is targeted to low and middle income formal salaried workers, it has a small progressive impact on income distribution. Benefits are paid to salaried workers earning less than AR$4,800 (approximately US$1,370) per month, who represent approximately 85 percent of the formal labor force. The program effect on poverty incidence i s significant: a recent World Bank report estimated that family allowances reducedpoverty by slightly over 2 percentagepoints as of 2006.' 7. Meanwhile, the non-contributory safety net programs have been shrinking since 2003. While Jefes was an effective program for mitigating the effects of the 2001-02 crisis, it was designed as an emergency program and was never intended to be part of a longer-term social protection strategy. Beginning in 2005, the Government has been I"Argentina. IncomeSupporttowardsthe Bicentennial" Report44194-AR. 2 implementing a transition strategy to phase out Jefes, and move to two new programs which are part o f a long-term social protection strategy: first, an employment benefit and training program, Seguro de Capacitacidn y Empleo (referred to as Seguro) run by the Ministry o f Labor, Employment and Social Security (MTESS), and second, a conditional cash transfer (CCT) program, Familias, administered by the Ministry o f Social Development (MSD). The transition i s expected to be completed by 201l2(as described in Figure 1). The number of beneficiaries o f Jefes has declined to an estimated 500,000 beneficiaries from a peak o f 2 million in 2002. Meanwhile, coverage under the new programs has been growing. By the end o f 2008 Seguro reached 80,000 beneficiaries and Familias was approaching 600,000. However, access remains restricted to former Jefes beneficiaries, which was closed to new entrants in 2003. These three programs together cost approximately 0.3 percent o f GDP. Several other programs, including "Plan Alimentario Nacional", a food program managed by M S D and "Programas de Empleo Comunitario", a community based employment program managed by MTESS also offers benefits to selected population groups. Figure 1.Jefes Transition Strategy 2003 Familias -- Coveragein IncomeSupport 2008: 0.6 million - Income Support - Peak Coverage: Seguro - Trainingand Job - Services IncomeSupport 8. Seguro and Familias have become the two core programs o f the non-contributory social protection strategy in Argentina. Seguro provides basic income and training or employment opportunities to unemployed workers, Familias (supported by an IADB loan) provides income to families with difficulties accessing job opportunities. The Government's goal i s to slowly transfer all Jefes beneficiaries to one o f these programs, that are considered better managed and more effective thanJefes. 9. Social protection i s defined here as the set o f programs that help individuals and households manage social risks, cope with their impacts, and overcome structural Familias,the CCT program should not be confused with Family Allowances (Asignacidnes Familiares), a contributory benefit for formal sector workers. The social protection programs are described in Annex 1. 3 poverty. The objectives o f social protection are poverty relief, employment opportunities, and consumption smoothing. In this regard, social protection programs in Argentina are important for both providing a safety net and protecting the population from shocks - such asjob loss, health, childbirth, old age, droughts, and floods, and the potential effects o f the current global crisis. 10. The ongoing worldwide economic crisis has had a limited impact inArgentina so far. The latest available unemployment figure i s from the last quarter o f 2008, when it reached 7.3 percent, below the rates for previous quarters. Similarly, the MTESS's Labor Indicators Survey shows an increase in the number o f employed workers in the formal private sector o f 5 percent between the third quarters o f 2007 and 2008. Also, collection o f social security taxes paid by employers grew 32.3 percent from December 2007 to December 2008, a percentage well over the average increase in salaries. While these figures indicate that the crisis has not hit Argentina's workers yet, it is likely that the effect will be stronger in future months. Thus, it i s important to build a more flexible and efficient social protection system, capable o f expanding to respond to the impacts o f the crisis when and ifthey occur. 11. Considering the current macroeconomic and social situation in Argentina, authorities have requestedthe Bank's support intwo areas o f the social protection sector: (i)enhancingthe effectiveness ofsocial protectionpolicies; and(ii)creatingconditions for expanding their coverage if necessary as a consequence o f the crisis. Under the first area, the proposed Project will support improvements in two key social protection programs, Seguro and Family Allowances which should result in better management and higher impact, and, in the case o f Family Allowances, less leakage o f resources3. The second area implies that those programs will become more flexible and able to include new beneficiaries ifand when economic and social conditions require it. 12. Sector authorities and Bank staff have agreed that, by focusing on the Seguro and Family Allowances programs, the Project will contribute to improved effectiveness o f the social protection system and strengthen the ability o f the Government to respond over the short-term, if unemployment and poverty increase. While Argentina's overall social protectionpolicy includes other programs, the focus on these two programs i sjustified by the need to concentrate efforts on activities that: (i)have an efficient, transparent and accountable system for transferring resources to beneficiaries; (ii)have a scale large enough to be able to have an impact on the population's welfare; (iii)meet basic conditions in terms o f design and operation to be scalable if an emergency situation arises; and (iv) offer adequate financial management procedures to be acceptable for the World Bank without major reforms. These two programs perform better than other existing programs inthese four dimensions. 13. Seguro i s a non-contributory unemployment benefit program that has received beneficiaries from the Jefes program. Seguro i s administered by the MTESS through local labor offices and combines a cash benefit with training andjob placement services. The program i s the Government's main instrument for assistance to the unemployed. It In particular, the traditional payment system for family allowances, through employers' compensations, has been considered too open to fraud and leakage, since verification of qualifying conditions was a responsibilityofthe employerswithout participationofthe State. 4 provides beneficiaries with a monthly benefit for up to two years, ranging from AR$200- 275 (close to 20 percent o f the minimum wage). In addition, participants receive job search support through municipal employment offices and the network o f employment services, including: labor intermediation services for public and private sector employment, basic and professional training, participation in training courses, and technical assistance for starting small businesses. 14. Income transfer expenditures within Seguro in 2008 reached approximately AR$200 million (US$60 million), with close to 78,000 beneficiaries by December 2008. The program is managed through 189 municipal employment offices, which also offer labor market intermediation and other services, while benefits are paid directly by the MTESS. Since Seguro's benefits last a maximum o f two years and the program was initiated in early 2006, nearly 17,000 beneficiaries have already completed their term and other 12,000 have left the program for other reasons (such as retirement or because they found a regular, formal job). 15. Seguro's implementation has progressed since its creation in 2006. New municipalities are included in the program every month, as Employment Offices are opened. Participants can enroll inSeguro when their municipalities join the network, thus this process has been critical to expanding coverage over time. 16. The second program to be supported, Family Allowances, provides several benefits to formal workers and their families. There are nine different types o f benefits, including Child, Disabled Child, Spouse, Pregnancy, Maternity, School Support, Birth, Adoption, and Marriage. Among these, Child benefits represent 90 percent o f all expenditures in the program, providing monthly benefits to nearly five million children. This benefit provides a monthly transfer o f AR$135 to children o f formal workers earning less than AR$4,800 per month4. This transfer is part o f the contributory social security system, financed by contributions. 17. The Family Allowances program was originally designed as a compensatory scheme. The system was financed through a monthly contribution from employers, defined as a percentage o f salaries. Employers would pay the allowances to their employees together with their wages and then reduce their payment o f social contributions by that amount. This scheme has been progressively replaced by a direct payment system inrecent years, following the experience o f other countries inthe region. ANSES, the Government's Social Security administration in charge o f managing and paying these benefits, aims to expand the scheme until most benefits are paid directly by ANSES instead of using deductions from contributions by firms, as this scheme is considered to be more reliable, better protected from fraud or manipulation, and provides the administrationwith a systemthat can be usedto pay other benefits as well. 18. By late 2008, approximately 70 percent o f expenditures on Family Allowances were paid through the direct payment system, called "Sistema Unico de Asignaciones Familiares" - SUAF. SUAF paid nearly 2.4 million child allowances each month by the end o f 2008. This spending represents approximately AR$3.9 billion, or US$1.1 billion a year. This program has grown rapidly in recent years, as the number o f child benefits 4There are some exceptions to these values, dependingon income level and regionof residence. See Annex I1for a hlldescriptionof the system. 5 paid by SUAF was below 300,000 in 2002, when ANSES began to promote it instead of the compensatory scheme. Transfers are made directly to beneficiaries' bank accounts, and financed with payroll taxes. Unemployment insurance beneficiaries and retirees can also receive family allowances, which are paid directly by ANSES. 19. The expansion o f SUAF to include all benefits o f the consolidated Family Allowances program i s a major contribution to improve effectiveness, transparency and governance o f the program5.Under the traditional compensation scheme, ANSES had no direct information on who were the beneficiaries, and had to rely on employers to control fraud or mistakes. In many cases there were duplication o f benefits (as both father and mother received them), incorrect payments and, in some cases, there have been claims about employers withholding the payments. The SUAF scheme allows for a direct link between the managing agency (ANSES) and beneficiaries, who receive their monthly benefit directly through a bank account or cash payment. This not only increases transparency, but also offers ANSES access to more information about the beneficiaries and their household. 20. SUAF could be also used to expand coverage beyond the current universe o f beneficiaries. In recent years there has been a growing debate on whether these or other social protection benefits should be also offered to independent, informal and unemployed workers6. As an example, Uruguay has recently decided to use its family allowances program to offer a near-universal income transfer scheme to support poor families, regardless of their labor market situation, and some provinces within Argentina are also exploring this as well. If this path were to be taken by the national authorities, SUAF would provide an efficient, operationally proven systemto implementit. 21. A possible expansion of family allowances to those currently excluded from the program has been a regular topic in social policy debates inArgentina. Different analysts have suggested that this direction could represent an effective approach to increase the social protection system impact on welfare and human capital formation, and authorities have been considering possible paths o f action in this regard. While no formal indication that reforms are planned for the near future has been given by the Government, some actions in this direction, particularly regarding unemployed workers, are being considered. 22. This operation will not only aim at improving the current performance o f the supported programs, but will also create the preconditions for a rapid scale-up, should the need arise. Inthe case o f Seguro, this will include support for the MTESS to expand the availability o f employment services, by linking disbursements to the advances in the transition process from Jefes. Inthe case of Family Allowances, the program will support the transition to direct payment o f beneficiaries, which will allow the Government to scale up the beneficiary base by having improved payment mechanisms and beneficiary information to do so. 5The authorities'goal is to pay all benefits correspondingto Law 24.714, that is, all wage-earners in the private sector. Civil servantswill continue to receivebenefitsdirectly from their employers. 6Unemployedworkers receivingthe formal UIsystembenefitsmay also receive family allowances, but only 6-8 percent of all unemployedare covered by the insurance. 6 23, Both Seguro and Family Allowances currently have efficient, transparent and accountable systems for transferring resources to beneficiaries. Seguro is implementedby the MTESS and monitored by a Management Information System (MIS) that is successfully used for the Heads of Household program. The existing World Bank- financed projects have improved the system (see Annex 3). Transfer payments are monitored by the Banco Nacidn and overseenby Auditoria General de la Nacidn (AGN), the national audit agency. Inthe case of Family Allowances, SUAF is closely monitored and audited by different agencies. 24. Both programs also have well designed and operating complaints system, where participants may communicate regarding possible mistakes intheir benefits or with fraud claims. MTESS and ANSES have call free telephone numbers, local offices and internet portals to receive such complaints, and internal processes to deal with them and correct problems or mistakes. 25. The Family Allowance program is, by far, the largest income transfer program targeted to children or young families, while Seguro is currently being rolled-out to become the main income transfer and support program for the unemployed. Both programs have the potential to be scaled-up and could be expanded. In the case of Seguro, the program could eventually be opened up to beneficiaries outside of the Jefes program, while Family Allowances could be expanded to the non-contributory population, or be targeted by income or labor market status (e.g. by covering workers who have lost their formal sector jobs). These types of expansion in coverage would be required for any additional financing inor beyond this operation. 2. Rationale for World Bank involvement 26. This project builds on the World Bank's support to the Government of Argentina for social inclusion, a central theme in the assistance to Argentina in the recent past and in the Country Partnership Strategy (CPS) to be discussed concurrently with this operation. The CPS has the goal of promoting further social inclusion as one of three core themes. Enhancing existing programs and building the basis for their expansion to a wider population are two critical steps to ensure that all Argentineans have access to a strong social protection program. The support will focus on programs that have wide social and technical support across the country. The World Bank has substantial experience in Argentina and in other countries on supporting programs aimed at strengthening the coverage and effectiveness of social protection systems and income transfer programs inparticular. 27. The World Bank is well positioned to respond to the Government's request for support in social protection, as it has active on-going operational and analytical programs supporting the social sector in Argentina. Bank support onto this sector began in the 1990s, when the first workfare programs, called Trabajar where introduced. Following the 2002 crisis, Jefes replaced the previous programs and expanded by nearly 10 times, and the Bank shifted its support to this new emergency program. More recently, Bank involvement has included financing for active labor market programs and training, through the Jefes Transition Project, and particularly through the Lifelong Learning 7 Project, that supports adult education and training to increase employability and productivity of workers. 28, Support for Jefes has includedtwo projects: the first in2002 during the crisis, and the second in2006. The first project financed transfers for beneficiaries who participated in temporary employment programs, education, or training activities. The loan also supportedthe Government's efforts to monitor and evaluate the program and enhance its transparency, including improvements in management, governance, and investment in information and communications systems. 29. Due to its rapid design and launch to respondto the crisis, Jefes had some initial weaknesses in terms of its beneficiary's registration process and workfare compliance enforcement. The Bank identified these problems at the outset, discussed them during preparation and designed an enhanced supervision program to improve the program's governance and monitor progress. The loan had provisions aimed at ameliorating the identified governance risks: (i)financial support was limited to participants complying with the workfare requirement (the Bank only funded 20 percent of the Program); and (ii) the Bank maintained a strong, proactive engagement to improve governance. Since May 2003, the Government, with Bank support, has improved program governance (better internal controls, database crosschecks and supervision). 30. Inits second stage, the Bank's support focused on the Government's objective to phase out Jefes and shift towards active employment promotion schemes. The Jefes Transition Project supports the shift from a focus on transfers towards linking beneficiaries with employment, through the setting up and strengthening municipal employment services and activities designed to improve the employability of the beneficiaries, including school completion and the combination of training with transient employment projects, especially in construction, including work on the Community Integration Centers (CICs), a program promoted by the Ministry of Social Development (Ministeriode Desarrollo Social, MDS). 3 1. In response to governance concerns, additional controls, particularly for Bank financing, were agreed during preparation of the Jefes Transition Project's negotiations. The Bank finances only transfers made with debit cards, a more transparent mechanism than cash payments, and disbursements were conditioned on improvements of workfare compliance in the overall program, with Bank financing ranging between 19 and 23 percent of total spending dependingon performance. 32. Most recently, the Lifelong Learning Project, approved in 2007, supports efforts to improve labor force skills, including support for education and training provided by Seguro. The project aims at consolidating, strengthening and extending the coverage of a lifelong learning system based on competencies for vulnerable adults with the objective of improving the employability of the participants (unemployed workers) and improving the career opportunities (for the employed). The project includes components to expand and strengthen the professional training system and certification based on labor competences; school completion, and employment promotion for youths (18-24) through training and internships. 33. This new project will continue this support for the Government's transition strategy from Jefes. The number of Jefes beneficiaries will decline through attrition as 8 beneficiaries move into formal employment, or into the new programs: Seguro and Familias. The new project aims to increase the effectiveness o fthe transition strategy and i s part o f the Bank's on-going commitment to support the development o f a strong and integrated social protection system inArgentina. 34. The Bank also has an active program of analytical work in social protection including a study o f the pension system (completed in 2006) and two programmatic AAA programs, the first focusing on labor market informality, and the second on the future o f social protection in Argentina, following the emergency measures o f the crisis period. The second AAA program was a two-year effort which involved extensive consultation with stakeholders at the national and provincial levels on options for the future of social protection in Argentina, including a qualitative survey o f over 300 key stakeholders, and a nationally representative survey on perceptions o f social policy. These activities have prepared the Bank well to respond to the request for continued financing o f the Social Protection system in Argentinaa7 3. Higher level objectives to which the project contributes 35. This operation will contribute to the goal of strengthening and expanding the social protection system in Argentina. It supports the Government o f Argentina's agenda o f social inclusion that aims at integrating social protection programs with formal labor market institutions. Government authorities see the role o f income support programs as temporary relief schemes that provide basic income to unemployed or poor workers and their families and, at the same time, promote a stable, sustainable integration of these workers into formal jobs. This operation contributes to this core objective by strengthening the institutional and administrative elements o f two core income transfer programs to improve their effectiveness and to ensure that they are able to be scaled up in the event o f a crisis. 36. By supporting the improvements inthe supported programs, the operation would contribute to advances in the higher level objectives for the broader social protection agenda inArgentina. Inparticular, the operation would: a. Help the Government to protect expenditures on core income transfer programs, at a time o f increasing fiscal pressures and maintain the poverty reduction gains relatedto these programs; b. Support the expansion of the Seguro program (Employment Benefit and Training), aimed at increasing employability o f unemployed and informal sector workers through temporary cash support, training, and job placement services; c. Support the Government's strategy to reform the Family Allowances program that provides income transfers to families o f lower income formal 'The reports (Report No. 36092-AR Informal Employment in Argentina: Towards Understanding Its Causes and Consequences and Report No. 44194-AR Argentina- Income Support Policies towards the Bicentennial)canbe found at www.worldbank.org/ar. 9 sector workers, increasing transparency and accountability, and setting the operational pre-conditions for a possible expansion o f coverage; and d. Enhance the capacity of the Government to monitor poverty and social protection, through technical assistance for the design and implementation of a national "Social Protection Survey" and the improvement o f analytical capacity. B. PROJECT DESCRIPTION 1. Lendinginstrument 37. The proposed Project would be financed by a US$450 million Specific InvestmentLoan (SIL), to partly support implementation of the Government's program duringa period of approximately one year. The project proposes to finance eligible social protection transfers, focusing on two programs that are considered core to the Government's social protection strategy: the Seguro program and the Family Allowances program, and eligible expendituresunder a Technical Assistance component. 2. Project development objectiveand key indicators 38. The project development objective is to increase the effectiveness o f Argentina's income transfer programs for the unemployed and families with children, by improving selected design features and the transparency and accountability o f the Family Allowances and Seguro Program, and by transferring beneficiaries from other, less effective schemes and programs, to the Family Allowances Program and the Seguro Program. 39. Progress under the Project will be monitored by a set o f indicators that will reflect advances in the implementation o f improvement strategies in Seguro and Family Allowances. The indicators will reflect, on Seguro; (i)the expected expansion o f participants to include 70,000 former Jefes beneficiaries during 2009 (to measure progress in inclusion o f beneficiaries), (ii)the expansion o f the number o f operational municipal employment offices by adding nearly 80 new offices to the program (to measure expansion o f services supply within the program), (iii)the proportion of participants involved intraining activities (to measure the quality of the program interms o f service provision); and (iv) the number o f participants exiting the program into formal employment. Within Family Allowances, indicators will reflect: (i)the number o f child benefits paid through SUAF, instead o f the compensatory scheme (to reflect progress in inclusion o f beneficiaries in SUAF); (ii)the proportion o f total Family Allowances benefits paid through the direct payment scheme (to reflect improvements intransparency and control schemes); (iii) number o f firms registered in SUAF; and (iv) the amounts the claimed to ANSES by employers as reimbursements through the compensatory scheme. 40. As discussed insection C.6 o fthis PAD and Annex 7, a subset o f these indicators will be used as disbursement indicators. These indicators will be considered satisfied 10 when published data for the indicators reach the agreed levels, as presented in the following table: Disbursement Indicators Baseline Targt Level (date) First Second Disbursement Disbursement ~ a. Average of the monthlypercentageof beneficiaries of the SCE Program receivingEmploymentandTraining Servicesof the total number of 23.5% 26% beneficiariesofthe SCE Program, (May 2008) 24% duringthe 6 monthperiodpreceding the date inwhich the Disbursement Indicatoris measured. b. Numberof beneficiariesregisteredin 78500 the SCE Program (May 2008) 82,000 100,000 c. Number o f EmploymentOffices authorizedfor deliveryofEmployment and TrainingServicesthrough agreements signedbetweenthe 181 200 230 Borrower,throughthe Ministry of (Nov 2008) Labor, andthe respectiveMunicipality or Province. d. Average ofthe monthlypercentageo f paymentsmade through SUAF of the totalpaymentsmadeunder the AF Programto salariedworkers inthe 58.7% 62.8% 67.4% private sector duringthe 12 month (Nov 2008) periodprecedingthe date inwhich the DisbursementIndicatoris measured. 3. Projectcomponents 41. The project will have three components. These will respectively support: (1) the provision of Seguro grant; (2) the provision of Family Allowances grants; and (3) a Technical Assistance component for monitoring, evaluation, and dissemination of social protection programs. 42. Components Iand I1will provide financial support to two of the social protection programs in Argentina with the highest current and potential impact on living conditions and human capital accumulation of two particularly vulnerable populations. The programs (Seguro and Family Allowances) offer, through a simple and efficient design, basic protection to these populations. Improvements currently under way should increase their effectiveness in the short term, thus justifying the Bank' support, and create conditions to further expand their coverage inthe future. 43. The third component will provide technical assistance to improve monitoring capacity at the MTESS. For years, social policy designers and officials inArgentina have had serious limitations due to the lack of complete, reliable data on some basic indicators. Most social indicators in Argentina are based on a household survey that is collected in 30 urban centers across the country and no information on small urban centers or rural 11 population i s available. Furthermore, the survey was mostly designed to collect data on labor market trends, and as such it does not include enough information about access, use, and impacts o f social protectionpolicies. Finally, accessibility o f microdata has been limited since early 2007, due to problems at the statistical agency. The component will support the design and implementation o f a new Social Protection survey with national coverage, which will produce quality information to be used inthe analysis and redesign o f social policies. 44. Specific activities to be supported under each o f the components would be as fo110ws: Component 1: Employment Benejit and Training Program (Seguro de Capacitacio'ny Empleo -Estimated amount US$80million)8. 45. This component will support the operation and scaling up of Seguro during 2009. Seguro is a program aimed at unemployed workers, providing a monthly income transfer, training, and job placement services. Access i s currently limited to current beneficiaries o f Jefes, although authorities have indicated that it could be open to other groups if necessary. 46. The component will finance Grants to eligible participants o f Seguro, including: (i)the basic income transfer (AR$225 per month); (ii)per-diems paid to eligible participants participating in Seguro activities (AR$50 per month); and (iii)incentives linked to participation inthe program's activities, if and when approved by the Bank (as described in more detail Annex 1 o f the PAD). The component will not finance the employment and training services provided by the Seguro program. 47. Participants beneficiaries qualify to receive the Grants by complying with eligibility requirements, as follows: a. Unless proposed by the Borrower and agreed by the Bank, must have been a recipient o f the Jefes Program benefits; b. Participants mustbe unemployed; c. Participants cannot be beneficiaries o f other income transfer programs, including Jefes and other national or subnational workfare, CCT, retirement, or non contributory schemes. d. Participants must register and sign an agreement to join the program at a Municipal Employment office incorporated to the Network o f Employment Services o f MTESS. Inthis agreement they commit to: i.Accept job offers received through the Municipal Employment Office (MEO); ii.Participate ininterviewsandjobplacement workshopsorganized by the MEO; iii.Join training activities (both basic and professional) offered to them by the MEO; 8For amore detailed discussion ofthe program, see Annex 1. 12 iv. Renounceto their participation inJefes program; e. Participants are excluded from the program if: i.Theyfindaformaljob; ii.They receivedthebenefitfortwo years, unlessotherwiseagreed by the Bank; iii.Theyrejectjobofferswithoutjustification; and iv. They fail to comply with the conditions set in their signed agreement, f. Participants are excluded from receiving Grants under this Project iftheir benefits have beenfinanced by the Jefes Transition Project. 48. Seguro i s an ongoing national program providing transfers and services to participants inmany provinces and municipalities. During the preparation of this Project, it was determined that the World Bank Safeguard on Indigenous Peoples (OP 4.10) must be applied to ensure that their rights and interests are adequately protected, preparing a national Indigenous Peoples Planning Framework and, when necessary, Indigenous Peoples Plans at the provincial or municipal level. Inthis regard, no Loan Proceeds will be usedto finance Grants to participants residing in a Province or Municipality where an IPP is required, untilthe IPP is preparedand approvedby the Bank. 49. As the program is being developed and expanded, the Government may decide to include other beneficiaries or provide new services or supplements (as above). If authorities decide to expand coverage under the current eligibility conditions, no Bank approval would be necessaryto finance the corresponding Grants. Ifeligibility conditions were changed, then the Bank will have to approve the new criteria before financing the corresponding Grants. Component 2: Family Allowances (Estimated amount US$365million)'. 50. This component will finance Grants to eligible beneficiaries of the Child Benefit of the Family Allowances program under the direct payment scheme. Family Allowances provide a monthly transfer to formal salaried workers with family dependents. The Grants will finance only child benefits, paid by the direct payment system SUAF, through transfers to beneficiaries' bank accounts. As of late 2008, ANSES transferred benefitscorresponding to nearly 2.4 million childrenthrough this system. 5 1. Family Allowances beneficiaries qualify to receive the Grants by complying with eligibility requirements, as follows: a. Beneficiaries must be workers formally employed as salaried by a private firmregisteredinSUAF; b. Beneficiaries' family information, including date of birth and tax number identification for all children, is registeredinANSES' data system; 9For a more detaileddiscussionofthe Family Allowances system, see Annex 1. 13 c. Beneficiaries must have children younger than 18 years old, living in Argentina and single, under their care, including natural, adopted, and foster children; and d. Beneficiaries gross monthly salary mustbe upto AR$4,800. e. Benefits must be paid through SUAF directly to the beneficiary bank account. 52. If salary is between AR$l00 and AR$2,400, benefits are AR$135 per child per month. For salaries between AR$2,400 and AR$3,600, benefits are AR$102 per child per month. For salaries between AR$3,600 and AR$4,800, benefits are AR$68. Also, benefitsare increased for beneficiaries living inless advantaged regions. 53. Under the Program, the SUAF expansion strategy will be implemented by requiring newly registered employers to join SUAF, and progressively switching existing employers to the new scheme. ANSES plans to complete the switching process in the next few years, when the compensatory scheme would be closed or limitedto exceptional cases. Component 3: Technical Assistance for the Social Protection System. (Estimated amount US$5million). 54. The technical assistance component will support capacity building within the MTESS, particularly in the area of monitoring and evaluation o f social protection policies. While the Ministry has strengthened its institutional capacity in recent years as a result o f the experience o f implementing some o f the most important social policies in Argentina, there i s a remaining challenge to improve its capability in the area o f policy monitoring and evaluation. To improve this area, about one percent o f the loan proceeds would be used to support the Ministry's team in the collection and analysis o f detailed micro data to build a stronger monitoring system. This system will allow authorities to better assess the effectiveness o f current social protection policies and promote reforms when necessary. 55. The component will include four activities: (i) and application of the Design National Social Protection Survey; (ii)Improvements o f the monitoring system for Seguro; (iii) Preparation o f studies to assess and improve coordination between MTESS and Provincial and Municipal governments in the implementation o f Seguro; and (iv) Dissemination o f information o f the objective and results o f the Project. These activities will be carried out by the Undersecretary o f Labor Studies o f the MTESS, in collaboration with the Secretary o f Employment team. 56. The National Social Protection Survey will focus on collecting and analyzing a set o f social indicators not available at this time. The survey will consider several areas, including: a. Labor market insertion o f householdmembers; b. Access to and impact o f social protectionprograms, with focus on income transfers; 14 c. Access to and impact o f social services, with focus on health and education; and d. Access to and impact o f other social programs, with focus on in-kind transfers. 4. Lessonslearnedand reflectedin the project design 57. This program draws on World Bank experience inthe design of social protection programs in L A C and other regions, as well as implementation experience in Argentina. Support for Seguro began under the umbrella o f the Jefes Transition and Lifelong Learning projects and i s informed by knowledge on the design o f employment services and training programs in OECD countries (refer to the PAD for Loan 7474-AR). Similarly, the Family Allowances component draws on existing experience with cash transfers inArgentina and lessons from OECD and other regions. Among other issues, in terms o f targeting, Family Allowances can be an effective safety net instrument for delivering assistance to working families." 58. The experience o f the implementation of the Jefes program in 2003 demonstrated the impressive capacity of the Government o f Argentina to rapidly deploy an income transfer program during a crisis - with 2 million people receiving the benefit by 2003. However, the experience o f the program also underscored the importance o f transparency and accountability in the administration o f the benefits, and the need for sound monitoring systems to track funds and ensure compliance with eligibility criteria and program regulations. These lessons from Jefes have informed the Project design. 59. Governance improvements to Jefes included buildingadditional cross-checks into the registry databases and adding additional controls within the MTESS. This included regular monthly cross-checks o f the registry database with other databases by an independent agency (National System o f Tax and Social Identification -SINTyS), as well as an additional cross-check o f the information on beneficiary payments used as supporting information for the Statements o f Expenditure. The MTESS also introduced cross-checks o f the registry against beneficiaries (and family members) among the participants in private health insurance plans. In addition, the spouses o f beneficiaries were cross-checked against private employment registries. 60. Social accountability was also enhanced through greater use o f public information and participation mechanisms. The MTESS coordinated with the National Consultative Council staff to hold a series o f workshops on the program in order to consult and provide information, promoting the participation o f local organizations (non- governmental organizations, unions, business groups, private companies, professional training centers, among others) inthe program. 61. Enhanced supervision measures, including media monitoring, also helped to ensure transparency. This included more frequent supervision missions for the project, as well as a systematic review o f the coverage o f the Heads o f Household Program in both 10See For Protection and Promotion: The Design and Implementation of Effective Safety Nets, 2008. M. Grosh, C. del Ninno, C. Tesliuc, and A. Ouerghi.The World Bank, Washington DC. 15 the national and provincial press. The Bank contracted a service to provide reports o f any mention or publicity on the Jefes and Seguro programs. The service covered all national newspapers, as well as the principal papers inevery province. 62. In general, the experience o f Jefes during the 2002 crisis demonstrated the importance o f having a social protection system able to respond effectively to short-term shocks. The response to the crisis was effective, but most policies and programs were not inplace and had to be designed and implemented in a short time, resulting in problems that could have been avoided. This experience has provided an important lesson which informs this operation. Rapid response to critical situations i s very difficult, unless institutions, programs, and instruments are already in place, providing income support and links to other interventions such as training to those inneed, and which can be scaled up ifnecessary. 63. The Bank's analytical work in recent years had a clear influence in the design of this program. Analyses carried out inthe Argentina Income Support AAA (P082177) and discussed in the final report ("Argentina- Income Support towards the Bicentennial" - Report 44194-AR) were critical to identify the relevance o f the three components included in this loan. The report discusses the solid social consensus towards social policies aimed at integrating beneficiaries in the labor market (as proposed by Seguro), and the significant impact that Family Allowances currently have and could have if expanded on social outcomes. The analysis also shows the limitations o f existing data and the need to develop new instruments to further refine the policymaking process, the underlyingrationale for Component 3 of this operation. 64. Lessons learned have been incorporated in the design o f this project, as follows. First, to avoid repeating the past problems of governance in Jefes, the project supports programs that have very clear financial flow systems, using the banking system to reach beneficiaries. Also the experience shows that the risks involved in designing and implementing a safety net program in the context o f a crisis are too high, particularly regarding governance early on in the program, targeting criteria and financing. Instead, by supporting improvements and readiness o f existing institutions and programs, the project looks to reduce these risks. Finally, the knowledge obtained preparing the AAAs has led the Bank to focus its support on strategic programs, targeted to the unemployed and children. 5. Alternatives consideredand reasons for rejection 65. While other loan instruments were explored, a Specific Investment Loan (SIL) i s preferredfor several reasons. First, the Government has a defined social protection policy that should be supported as a sector, since it provides protection against a wide set o f risks or lifetime vulnerabilities. Argentina's social protection system has programs offering protection against most social risks, but the main challenge o f this system i s to include all vulnerable populations in these programs, as in many cases the most vulnerable groups are excluded. Secondly, Bank support would be fully owned by and integrated within the National Government, as it would represent a contribution to finance the improvement o f existing programs, by pooling Bank and Government resources. Finally, Argentina has strong financial management systems that can be relied 16 upon by the Bank, allowing for transparent, robust disbursement processes. By adopting this approach, World Bank's disbursements would be heavily concentrated intwo income transfer programs, to accelerate program implementation. 66. The Seguro and Family Allowances programs were considered the most effective programs to support to lay the groundwork for an integrated safety net. There are important gaps in Argentina's safety net for the poor. Seguro and Familias (the CCT program managed by the Ministry o f Social Development) have operated as transition strategies for the beneficiaries o f Jefes; but they have not been opened to new beneficiaries who were not participants in Jefes. This represents an important coverage gap, as independent analysts have estimated that as many as 1.8 million households inthe country meet the eligibility criteria o f Jefes but are not receiving it because they did not apply in 2003. Seguro has the potential to be a national income support program for the unemployed, while the Family Allowances program could be scaled up in the future to include informal workers, or could be targeted to poor households. 67. The possibility o f supporting other social protection programs was considered. Among those, Familias, a CCT program managed by the Ministry o f Social Development, was analyzed. However, the Government has had on-going support for this program from the IDB, and while there i s coordination between the institutions, there i s a clear division o f labor. Other social programs that were considered were either too small in scope to be viable for expansion or not institutionally viable to meet World Bank fiduciary standards. 68. Finally, an APL series was considered as a way to provide on-going support to the Government's social protection program, but discarded due to the high level o f uncertainty regarding the overall macroeconomic and sectorial trends. Discussions during the Concept Review and Quality Enhancement Review meetings concluded that this Project could be followed by a new loan or additional financing. To this end, it would be critical to develop a more complete assessment o f the social protection system and its impacts in Argentina, for which the successful implementation o f the Social Protection Survey supported by Component 3 and to advance in further reforms to the supported programs, including a proactive strategy to expand coverage beyond the current target groups to include other unemployed and informal workers intheir target populations. C. IMPLEMENTATION 1. Partnershiparrangements 69. At this time there are no partnership arrangements envisaged for this operation. The Inter-American Development Bank (IADB) is also involved in the social protection sector and finances Familias, the related conditional cash transfer program (CCT) managed by the MSD. The Bank team has maintained a fluent dialogue with IADB colleagues regarding programs design, operation, and possible reforms, including shared activities such as a co-sponsored seminar inNovember 2008. 17 2. Institutionaland implementationarrangements 70. The National Directorate of Projects with International Credit Organizations (DNPOIC) of the Ministry of Economy and Public Finance will coordinate the implementation of the project and will act as the Bank counterpart for the project. The DNPOIC will have overall responsibility for achieving Project goals through the coordination of activities with the specific Agencies responsible for the implementation of Project's components; MTESS, though the Secretary of Employment (Component l), the National Social Security Administration - ANSES (Component 2), and the Undersecretary of Labor Studies (Component 3). By taking advantage of Argentina's institutional and fiduciary framework, the proposed project would build on the existing organizational and management structures of the MTESS and ANSES which are currently responsible for managing and implementing Seguro and Family Allowances, respectively. 71. The processes and procedures governing project implementation would be outlined in detail in the Project's Operational Manual (OM). Before negotiations, the DNPOIC would prepare a draft of an O M of the project, which would define roles, responsibilities, mechanisms, schedules, eligibility criteria of Grants and Beneficiaries and accountability arrangements, necessaryfor implementation ofthe project. 72. The DNPOIC will have overall responsibility for coordination with ANSES and MTESS and for the FM responsibilities of the program comprising accounting and financial reporting, flow of funds and external auditing arrangements. 73. ANSES as well as MTESSare part of the NationalPublic Administration, with no juridical personality separate from the Republic of Argentina, an thus their expenditure`s execution processes are included in the Integrated Financial Management System (SIDIF). SIDIF will monitor the budget execution of 100 percent of payments of the Seguro and Family Allowances expenditures to be financed from the proceeds of the loan. 74. Inorder to include a Municipality inthe Seguro program (hence, makingSeguro beneficiaries eligible for Grants under this Project), the MTESS signs an agreement with the Municipality (and Province, when it corresponds) to establish the terms of this participation. These agreements include: (i)theMunicipality'sobligationto: (I) disseminate among Jefes Program beneficiaries the SCE Program and to register SCE Beneficiaries; (11) operate the Employment Offices; and (111) promote the formal education andtraining opportunities ofthe SCE Beneficiaries; and (ii) Municipality'sand/ortheProvince'sobligationto:(I) the the provide Employment and Training Services; and (11) if applicable, comply with the provisions ofthe IPPF and IPP. 18 3. Monitoringand evaluationof outcomeshesults 75. The results monitoring framework for this project builds on the experience of the Government of Argentina and the World Bank during the implementation of previous and existing projects, includingthe Heads of Household, Heads of Household Transition, and Lifelong Learning projects. Monitoring of Component 1 (Seguro) and Component 2 (Family Allowances) will be based on the existing administrative systems and databases that exist for both programs - in MTESS, for Seguro, and ANSES, for Family Allowances. The arrangementsare discussed inAnnex 3. 76. Component 3 (Technical Assistance) will contribute to the results framework of this program and build long term capacity in the Government for monitoring social protection programs. Program activities will aim at improving the information base on income transfer programs, and Seguro and Family Allowances in particular, through the new survey for analysis of social protection programs, as well as improvements to the existing information systems. 4. Sustainability 77. This project is supporting two ofthe largest national social protection programs in Argentina. The Government has been consistently financing both programs and has budget commitments for 2009 (Table 1). In the case of Seguro, it is expected that the Loan will finance a Grant for a total amount that represents approximately 60 percent of transfers, while the Government will fund the remaining 40 percent of total program expenditures. Inthe case of Family Allowances, the Government finances most benefits. Family allowances benefits during 2009 (including both the SUAF and compensatory schemes) should be equivalent to approximately AR$9 billion (US$2.57 billion). Benefits paid through SUAF will be close to AR$5.4 billion (US$1.54 billion) and child benefits paid through this scheme should amount to 4.05 billion (US$l ,13 billion) Thus, the Bank Grants are expected to be equivalent to approximately 31 percent of all child benefits paidthrough SUAF, or 14percent of all transfers under Family Allowances. Table 1. Source of Funds: Argentina BasicProtectionProgram Componentandlor Activity Government Bank Total US$ million US$ million US$ million ComponentI:Seguro, Employment Bene@ and Training 1 1 1 Program 55.0a 80.0 135.0 ComponentII:Family Allowances' child benefis (through the Unique System of Family Allowances-SUAF) 765.0 365.0 1,130.0 ComponentIII: Technical assistancecomponentfor the Social Protection System 0 5.0 5.0 Total 820.0 450.0 1,270.0 19 5. Critical risks and possible controversial aspects 78. Experience with risks in past operations: The two projects supporting Jefes (Loans 7157-AR and 7369-AR) were classified as high risks in 2002 and 2006, considering the social emergency context and the political turmoil in Argentina during preparation o f the first loan and the difficulties in the implementation process o f Jefes in the second case. Multiple mitigating measures were taken, including audits, changes in payment systems, and technical support to implementing institutions. As this new project i s prepared, overall risks have declined, partly because o f the mitigation measures implementedduringprevious projects. 79. The Basic Protection project will support Seguro and Family Allowances, with no direct support to the residual Jefes program. The supported programs have much stronger control systems, and social and political support i s wider. However, some relevant risks remain and need to be addressed. 80. The Bank sees the possible impact o f the financial crisis and the Government response as the potentially most relevant risk. The noncontributory social safety net has added no new beneficiaries since 2003, resulting in a growing stock o f uncovered poor. As macroeconomic conditions improved in recent years, this issue became less relevant, as vulnerable households found more possibilities o f finding income sources in the labor market. However, if the economic crisis results in higher unemployment and, consequently, higher poverty rates, pressures to increase coverage and benefits will be unavoidable. In a context o f slow changes a carefully implemented expansion strategy would be feasible. However, if the impact i s larger, authorities might prefer to adopt an emergency approach, creating new programs or adapting others already existing, instead o f those supported by the loan. While this i s a clear risk, the operational improvements supported by the loan would be an important advance by themselves, and the more flexible and adaptable programs resulting from these improvements would be ready for addressing any future needs. 81. Financial Management (FM) risk at entry was considered Substantial mainly due to the special features o f a project o f this type involving a large number o f beneficiaries that are distributed across the entire country and thus implyinga large number o f monthly payments. After reviewing program controls in operation, including the internal audit plan and internal control tools in ANSES over the beneficiary payment system and process to validate the consistency and veracity of the beneficiaries' database; and proposed mitigation measures; the overall residual risk has been decreased to Moderate. Proposed mitigating measures are intendedto adequately cope with the identifiedrisks.A detailed risk analysis for FMi s provided inAnnex 7. 82. Procurement risks are limited to Component 3 (technical assistance). They are considered substantial due to the lack o f experience o f the implementing area with Bank operations, and the short implementation timeframe, as discussed in Annex 8. However, giventhe proposedmitigation measures, the residual risk is considered to be Moderate. 83. Other risks (implementation, social safeguards, reputational) are considered either low or moderate, as described in the risk matrix. Thus, the overall risk for the project is considered to be Moderate. 20 Description of Risk Rating Mitigation Strategy Residual before Risk mitigation Rating measures Possibleimpactsof the financial Substantial While this i s a clear risk, the program Moderate crisis and Governmentresponse. is designedto strengthenthe The loanwould support actions institutionalaspects of the Seguro aimingat improvingthe andFamilyAllowances programsto performanceof current Social enable themto be scaled-up.The Protectionprograms, and creating FamilyAllowancesprogramalready the conditionsto expandtheir has an important impactonpoverty coverage inthe near future. andmeasuresto improve However, there is an important transparencyand efficiency ofthe level o f uncertaintyregardingthe programwill result inany expansion impact ofthe crisis on Argentina. If ofthe programhavingan even greater impact.Coverage targets will impact is moderate,a carefully be set for any subsequentfinancing implementedexpansionstrategy might work. However,ifthe impact for the programs.The advances in i s larger, authoritiesmight prefer to the programdesign supportedby the loanwill be an important advance in adopt an emergency approach, themselves,andthe resulting creatingnew programs or adapting othersalready existingprograms, improvementsin flexibility and insteadof those supportedby the adaptability of the programswould loan. be ready for addressingany future needs. Implementationcapacity and Low Bothprogramsare already in place Low sustainability.Supportedprograms and operating, without problems. expansioncouldbe affectedby Expansionis plannedin a implementationproblems progressiveapproach, to reduce impacton institutionalcapacities. Procurement(Component 3): Substantial The CPyPE would hire a Moderate risks concerningprocurementfor procurementconsultant implementationof the projecthave knowledgeableof Bankprocurement beenidentifiedregarding:(a) the policies and procedures(with a lack of experienceofthe minimumof 5 years ofexperience; Undersecretaryof Labor Studiesin Before negotiations,a project Bank financedprojects,b) the short operationalmanualwould be termofthe implementationof the developedincludingthe componentjointly with the implementationarrangements andthe proposeddesignto be carried out procurementprocedures; and(c) difficultiesinthe Defineand submit the procurement implementationofprocurement planfor the first 18 monthsofthe arrangement for Bank financed projectbeforenegotiations. project during the pastyear by UEC of EmploymentSecretary FinancialManagement. Project Substantial Internalcontrols are built intothe Moderate involves a largenumberof system, and controls over payments beneficiaries that are distributed to beneficiarieshavebeen across the entire country andthus strengthenedinthe recent past.Bank 21 Description of Risk Rating MitigationStrategy Residual before Risk mitigation Rating measures implyinga largenumber of debit cards will be predominantly monthly payments,anddifficult usedfor paymentsto beneficiariesof control. the SCE. Familyallowanceswill be paiddirectlyto beneficiaries' bank accounts.Inadditionto the normal audit carried out by the AGN, a concurrentaudit will specifically examine the controls andprocedures usedfor makingpayments. Social Safeguards and Impacts: Substantial The TA componentwould finance Moderate Lack ofreliable data for monitoring the launchingof a new national programs impact may affect SocialProtectionsurvey, managed authorities' capacityto assess the by the Ministry of Labor, to build a impact of programsanddesign strongmonitoringsystem.MTESS remedialactionsifnecessary. has runnational independentsurveys inthe past, with successfulresults. Reputational: As one goal of the Moderate Regardless of future improvements, Projectis to support readiness for a reformscurrentlyunder possibleexpansionof coverage in implementationand supportedby the supportedprograms,there is a Projectare widely supportedby reputationalrisks ifauthoritiesfail analystsandpolicy makers to go aheadwith this expansion The PADand other documentsis Support for social protectionsector could be interpretedas unrestricted very explicit indicatingthat the support to all policies, including support for these programsdoesnot somethat might be controversial imply unrestrictedsupportto all policies Overall Risk Rating Moderate 6. Loankredit conditions and covenants 84. The Borrower will implement the project following the stipulations o f an Operational Manual (OM) acceptable to the Bank. The OM will include, inter alia, the project's institutional arrangements, eligibility criteria for Grants and Eligible Beneficiaries, and operational, accounting, procurement and disbursement procedures. 85. Auditing Special Reauirements The Borrower, through the MTESS and ANSES shall ensure that the annual audits o f the Project, carried out in accordance with terms of reference satisfactory to the Bank, will verify that the Seguro Beneficiaries and the AAFF Beneficiaries are eligible for receiving the Seguro Grants and the AAFF Grants as per the eligibility criteria o f the Seguro Beneficiaries and the AAFF Beneficiaries. 22 86. Safeguard Covenant: (i) The Borrower shall carry out, and shall cause the IPPF Entities to carry out the IPPF and prepare and carry out each IPP in accordancewith such IPPF and IPP; and (ii) the Borrower shall prior to providingany SCE Grant inthejurisdiction of a Province or Municipality where the IPPF applies, enter into an agreement with the respective Province and/or Municipality setting forth their respectiveobligations inthe implementation of the IPPF and IPPs. 87. Reporting Covenant: the Borrower shall monthly furnish to the Bank reports to verify the evolution of Monitoring Indicators discussed in Annex 3, including a report from ANSES on SUAF, a report from AFIP on the compensatory scheme of Family Allowances andthe monitoringreports for Seguro. 88. Disbursement Conditions: The Bank will disburse up to 20 percent of the loan amount (US$90 million) to finance eligible retroactive expenditures. Disbursements for Grants after the loan disbursed US$90 million from the loan account for Components 1 and 2 will only be authorized when the DisbursementIndicators have reached the target levels indicated for the "first disbursementlevel" in the table included in Section B.2 of this PAD. Disbursementsfor Grants after the loan disbursed US$270 million from the loan account for Components 1 and 2 will be authorized when the Disbursement Indicators have reached the target levels indicated for the "second disbursementlevel" in the table includedin Section B.2 of this PAD. There will be no disbursement conditions for Component 3. D. APPRAISAL SUMMARY 1. Economic analysis 89. Economic analysis found that Seguro and Family Allowances have a significant economic impact, in terms of human capital formation, welfare and productivity of workers. Seguro provides workers with better opportunities to find formal jobs, by expanding their skills and increasing their employability. As of December 2008, nearly 8,500 participants had found a formal job, representing approximately 40 percent of all participants leaving the program. 90. Regarding Family Allowances, an analysis using a series of data from recent years (from 2004 to 2006) indicate that family allowances positively contribute to the accumulation of human capital, as they have an impact on school attendance, health coverage and poverty incidence. Comparing social indicators for individuals and families with and without access to Family Allowances benefits (and considering only those with income below the normative threshold for FA), significant gaps are found in favor of the AAFF program beneficiaries. 23 91. On education and health, there are important differences in several indicators. Average human capital loss (that is, the gap between educational level attained and expected according to age) i s thirty percent higher among children o f school age (5-18 yrs old) that are not covered by Family Allowances than among those that are covered. Differences are also important on gross and net enrollment rates for pre-school and for drop out rates at both primary and secondary levels. On health, available data i s limitedto access to health insurance. Children with Family Allowances have a much larger coverage rate than those with no benefits, reflecting the fact that those children have access to health insurance provided to their parents through the formal social security system. 92. A counterfactual analysis, considering the impact that eliminating Family Allowances would have on income and poverty status o f working families with children show that poverty rates could increase by approximately two percentage points if the program were eliminated. Furthermore, the analysis shows that Family Allowances, while not directly targeted to the poorest segment o f the population, has a positive impact on income distribution, as it i s clearly more progressive than labor income and other income sources. 93. Simulation analyses show that, if Family Allowances were extended beyond their current beneficiary population, Seguro and Family Allowances could provide the building blocks of an effective safety net. The simulation exercise found that a family allowance benefit targeted to children inthe bottom two quintiles would have the greatest impact for poor households. The exercise simulated four scenarios o f non-contributory benefits. The first was a universal benefit o f AR$400 per month for the unemployed (analogous to the Seguro cash benefit). The second scenario simulated the impact o f an income transfer o f AR$400 per month for all poor households (e.g. a universal transfer). The third scenario considered a targeted version o f the Family Allowances program which would transfer AR$155 per month for each child under 18 in the poorest households (the bottom two quintiles). Finally, the fourth scenario assessedthe combined impact o f Family Allowances and a transfer to elderly individuals not receiving pension benefits for AR$270 (equivalent to the amount o f the Plan de Inclusidn Previsional, or `Moratoria' benefits).' ' The simulations considered effects on coverage, poverty, and inequality, as well as the simulated programs' overall costs. It i s important to note that these simulations were simplified exercises that considered income effects only and did not incorporate other potential design aspects o f programs, such as training or conditionalities. 94. The results o f the scenarios indicate that if unemployment transfers and family allowances were expanded beyond their current beneficiary population, they could have an important impact on the welfare o f the poor. As shown inTable 2, several options with costs o f about 0.5-0.6 percent o f GDP could have significant impacts on welfare indicators. For example, a Family Allowances program aimed to children in the first and second quintiles could result in a dramatic reduction o f extreme poverty levels, from 8 percent to below 3 percent o f the population. Other alternatives, such as universal IIThe Moratoria was a programimplementedin2007 that grantedretirement benefitsto nearly 1.7 million older citizens who didnot haveadequate contribution historiesfor the pension system. 24 unemployment benefit or a transfer targeted to poor households, would also be effective. On the other hand, expanding coverage of the elderly inaddition to the family allowances would have little effect, mostly because the Moratoria benefitshave already reached near universal coverage for that age group. 95. The previous analyses will be complemented as the main product of Component 3, the Social Protection Survey, becomes available and i s used to assess the impacts of the differentprograms (including Seguro andFamilyAllowances) indetail. Table 2. Simulatedpolicy impacts Family Unemployment Allowances Baseline Poverty Transfer FamilyAllowances Transfer and Old Age Transfer extreme poverty 7.8% 6.5% 2.1% 2.7% 2.6% poverty 25.0% 22.4% 14.5% 19.8% 19.8% poverty gap 10.2% 8.9% 4.1yo 5.7% 5.7% Gini 0.4765 0.4643 0.4411 0.4542 0.454 Coverage (2 quintiles) 12% 19% 44% 38% 47% Total Cost (% GDP) 9.11% 9.66% 9.77% 9.58% 9.73% Marginal cost (YOGDP) 0.55% 0.66% 0.47% 0.61% Source: WE3 Staffcalculations. Note; Values are percentages except where noted (Gini coefficients). 2. Technical 96. The technical justification for the proposed project is that: (i)it would promote employment of current participants inincome transfer programs (Jefes and Seguro); (ii)it would promote design improvements in both Seguro and Family Allowances, resulting in more transparent and efficient programs; and (iii)it would contribute to create conditions of readiness to expand these programs by includingmore informal and poor beneficiaries, as part of the social inclusion agenda of the Government. 97. Argentina has a strong experiencewith implementation of these programs, and the Project will contribute to deepen and accelerate the development of a strategy already defined and under application. The experience in Seguro and Family Allowances regarding design, operation, and monitoring give support to a positive outlook for this project. 3. Fiduciary 98. Financial Management: A Financial Management (FM) assessment of the arrangements for the proposed project was performed in line with OP.BP10.02 and guidelines issued by the Financial Management Sector Board (FMSB)12. The overall conclusion of the assessment is that the project's implementing agencies, MTESS and ANSES underthe coordination of the DNPOIC have adequate arrangements inplace that FinancialManagementPractices inWorld Bank-FinancedInvestmentOperations, November3,2005 25 meet the Bank's minimumrequirements.In addition to the National Integrated Financial Management System (SIDIF), both the implementing agencies have existing financial management systems that can be relied upon to ensure that the project's funds are used for their intended purposes. 99. Procurement: The Undersecretary o f Labor Studies o f the MTESS through the Coordination o f Special Programs and Projects (CPyPE) would be responsible for the procurement actions for Component 3, mainly for the selection and contracting of consultancy services (individuals and firms) with the collaboration o f the Central Executing Unit (UEC) o f Employment Secretary o f the MTESS, who will assist them in the procurement o f goods. 100. An in-depth assessment of the Borrower's capacity was carried out by the team and an action plan was prepared to address all risks identified, as discussed in Annex 8. The overall procurement risk has been rated as substantial, but, after considering mitigating measures, the residual risk i s considered to be moderate. 101. Procurement for Component 3 (Technical Assistance) would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 - RevisedOctober 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 - Revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in Annex 8. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame would be agreed between the Borrower and the Bank inthe Procurement Plan agreed at negotiations. 4. Social Assessment and Safeguards 102. The design o f this program was informed by extensive consultations on the role and design o f income transfers. This included two main instruments: first, an extensive set o f consultations with policy makers and practitioners in social policy, mainly at the provincial level; and second, a nationally representative opinion survey on the views and perceptions o f the population.l3These instrumentsprovided insights into general attitudes to cash transfer programs andpreferences for program design. 103. The survey found that there i s a consensus that the current income support programs are important, regardless o f whether there i s a crisis.I4 Less than 30 percent o f the population would eliminate income support programs ifthey could not be improved. A majority (61 percent) agreed that "programs are always needed because there are people who need them," whereas 28 percent agreed that "programs are only needed during economic crises." Similarly, 41 percent believe that poverty would be worse in ~ l3The findings ofthe consultations and survey are summarizedinArgentina: Income Support Policies towards the Bicentennial, Report No. 44194-ARThe World Bank: Washington, DC. l4Two instrumentswere usedto assess the population views: first, over 300 consultationswith stakeholders at the provincial level, and second, a national opinion survey (EPPS). Both are discussed in chapter 3 of this report. 26 Argentina without the programs, 38 percent think that unemployment would be worse, and 37 percent think that inequality would be negatively affected. 104. The consultations and survey indicated a strong interest in linking income transfers to the labor market. While there is debate about the level to which social programs should be linked to the labor market, both the consultations and the survey sent strong messages, that employment should be an objective o f social policy, and that labor market incentives and opportunities should be considered in policy design. Related to this sentiment, there was nearly universal support (93 percent in the survey) for contraprestaciones, or for some form o f conditionality to be included in the design o f social programs. 105. The potential beneficiary population expressed a strong preference for programs with tangible labor market outcomes. Beneficiaries prefer programs that would provide training, employment services, and ideally a guaranteed job upon completion, even if it would mean a lower benefit amount or duration o f eligibility. This finding indicates strong support for Seguro which combines a cash benefit with employment services. 5. Environment 106. The Environmental Rating for the Project, as agreed at the PCNreview is "C." 6. Safeguardpolicies 107. Only one safeguard (OP 4.10, Indigenous Peoples Policy) i s triggered by this Project. The objective o f the Basic Protection Project i s to increase the effectiveness o f Argentina's income transfer programs for the unemployed and families with children, by improving design features, transparency and accountability in two core programs and transferring beneficiaries from other, less effective schemes, to them. N o large scale, significant and/or irreversible impacts are anticipated. In the case o f the first Project component (Seguro de Capacitacibn y Empleo) the location o f project activities will depend on the location o f municipal employment offices. Though the specific municipalities participating in the project will be determined during its implementation, at least some o f them are expected to contain indigenous communities, making the application o f the requirements under OP 4.10 relevant to these areas. Application o f the OP i s not expected to be relevant to actions under the Family Allowances component because the cash transfer benefits provided in this case are i s not in any way differentiated or targeted based on ethnicity. 108. According to the 2001 Population Census, 2.8 percent o f households include at least one person who recognizes himself as indigenous. Among the indigenous population 10 years old or older, the illiteracy rate i s 9 percent, three times greater than the national average. Slightly less than 80 percent o f the indigenous population older than 15 years have reached secondary education, even if not completing it, while a third have not completed primary, compared to 67 and 18 percent, respectively, for the population as a whole. 27 109. At the present time and with the countrywide information available the municipalities that have indigenous peoples which would trigger of OP 4.10, as per the criteria of OP 4.10 are 112 municipalities in 14 provinces, listed in Annex Iof the Indigenous Peoples Planning Framework (IPPF). 110. The proposed project will target participants currently in the Seguro de Cupucitucidn Empleo Program. The location of activities for Seguro depends on the location of municipal employment offices. After a screening carried out in coordination with the Bank, the Government has estimated, as of now, that about 17,000 Seguro's participants belong to 25 municipalitiesof the 112 mentioned inthe preceding paragraph. There is not sufficient information to know the extent to which indigenous communities participating inthe Seguro would be present inthose municipalities. 111. Inaddition, it is expected that more municipalities will be included inthe Seguro during project execution, and they might also trigger OP 4.10 (as they might be included inthe 112municipalities mentioned before). 112. When Seguro beneficiaries are part of indigenous communities for which the Indigenous Policy applies, the Policy will be triggered and the Municipality where the Beneficiaries are registered will be required to prepare and carry out an IPP. The IPP covers the measures to ensure that the education and training services provided to the Beneficiaries under the Seguro are culturally appropriate. When the Provinces provide training or education services, the IPPF will be applied jointly with the Municipality where the beneficiary is registered. 113. Following the provisions of the IPPF, the IPPs will incorporate culturally appropriate strategies of promotion and communication adequate for indigenous communities in order to guarantee their full understanding of Seguro. In particular, the following are envisaged: (i)the use of existing material in the original languages; (ii) training of local agents to register participants in these communities; (iii)promotion and communication campaigns; (iv) mechanisms to provide information and respond to complaints, at the national as well as the provincial level; (v) training for tutors to work with the participants from these communities; and (vi) a description of the specific modality that would be usedto offer these services ineach Indigenous community. 114. The Provinces or Municipalities where the specific incorporate culturally activities take place will have the primary responsibility for preparation and implementation of the IPPs, taking advantage of their experience in responding to needs and demands of indigenous population. These entities will be responsible for financing the activities included in the IPPs, with support from MTESS when necessary and according to specific bilateral agreements. MTESS, with support from Bank staff as necessary, will participate and monitor the implementation of the IPPs. This monitoring and supervision strategy will ensure the implementation of an appropriate intercultural approach for indigenous communities. Financial resources, when necessary, will be provided by the MTESS. The preparation and implementation of the IPPs by the Government (including the necessary inter institutional agreements), satisfactory to the Bank, are considered eligibility criteria of Seguro Grants to residents of those provinces or municipalities. 28 115. The IPPF preparedby the Borrower has beenreviewed and approved by the Bank, and has been published by the Borrower and submitted to the Bank's Infoshop, in compliance with OP 4.10. 116. The Argentine government is executing the Lifelong Learning project (Loan AR- 7474), which includes financing for most services offered to Seguru's beneficiaries. Therefore the actions taken in the context of Lifelong Learning project preparation and implementation are highly relevant for the Basic Protection Project. 117. Finally, and given the nature of the Project, no negative impacts are expected. However, it i s possible that some groups or communities may have concerns about the implementation process, particularly regarding access difficulties to services. In order to prevent and solve possible conflicts appropriately, the standard complaints resolution channels of the Ministry of Labor would be used. These channels operate through the provincial offices of the Secretary of Employment (Offices of Employment and Professional Training). Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management(OP 4.09) [I [XI Physical Cultural Resources (OP/BP 4.11) [I Ex1 Involuntary Resettlement(OP/BP 4.12) [I [XI Indigenous Peoples (OP/BP 4.10) [XI [I Forests(OP/BP 4.36) [I [XI Safety of Dams (OP/BP 4.37) [I [XI Projects inDisputedAreas (OP/BP 7.60)* [I [XI Projects on International Waterways (OP/BP 7.50) [I Ex1 7. Policy Exceptions and Readiness 118. No Bank policy exceptions are required by this project. The Project meets all regional criteria for readiness for implementation. Fiduciary arrangements are in place, the project staff and consultants have been mobilized. Counterpart funds have been budgeted and are available. The monitoring and evaluation arrangements have been agreed and are being put into place. Indicators are agreed and baseline data have been collected. * By supporting the.proposedproject, the Bank does not intend toprejudice thefinal determination of theparties` claims on the disputed areas 29 Annex 1: Country and Sector or ProgramBackground ARGENTINA: BasicProtectionProject COUNTRYCONTEXT Economic Context 1. Argentina's economic and social crisis of 2001-02 was one of the most severe losses of income and downturns in living standards on record, and the last several years have been largely dominated by the country's recovery. Argentina's focus in 2007 shifted from recovery to sustainability, but now the Government faces the daunting challenge of preserving the strides made against poverty and unemployment against the backdrop of the worst global economic crisis since the Great Depression. While Argentina is, inmany ways, muchbetter positioned going into this crisis than in2001, the country's ability to implement countercyclical policies is limited by weak access to financing sources, particularly external, and uncertainty of the global macroeconomic outlook andthe direction of economic policies. 2. Recovery from 2001 Crisis. Inrecent years, Argentina's growth has beenstrong and underpinnedby twin surpluses. In 2007, the economy grew by 8.7 percent, the fifth straight year of 8-9 percent growth since the financial crisis of 2001-2002. The recovery was supported by a strong domestic demand, including a dynamic expansion in investment spending since 2003, improved fiscal performance and favorable terms of trade (high commodity prices), particularly since 2006. The economy also benefitedfrom a significant reduction in public debt following the 2005 sovereign debt restructuring. Twin surpluses (fiscal and external) allowed the country to accumulate foreign reserves and reduce the debt burden.The government's economic framework, aimed at supporting the growth momentum, rested on three main pillars: maintenance of a competitive exchange rate; fiscal prudence; and active income policies. This strategy was very successful. Poverty more than halved from 58 percent in 2003 to 23.4 percent in 2007, and unemployment fell from 21.5 percent in 2003 to 8.3 percent in 2007 - though poverty remains above the levels of 1970s. 3. Recent growth performance. The four-month farm conflict that erupted in March 2008 took a toll on the economy, although growth kept its momentum until the second half of 2008 when the global economic crisis began to affect more strongly Argentina. The conflict increased economic uncertainty which in turn led to a surge of capital outflows and pressures on the currency, increases in domestic interest rates and a decline in peso-denominated deposits. The central bank acted promptly and stabilized the exchange market and banking system. A second wave of financial sector stress resulted from the deepening of the global financial crisis and the October announcement of the nationalization of the private pension funds, but stability has now returned after intervention by the Argentine Central Bank (BCRA). More generally, market confidence has also been eroded by concerns over inflationary pressures that surfaced in 2007,' the ' Inearly 2008 inresponseto these pressures, the Governmentreducedthe realrate of growth of primary expendituresso as to neutralizethe fiscal impulse. 30 increasingly unfavorable external environment, higher financing needs, and uncertainty over the global macroeconomic outlook and the course o f domestic economic policies. 4. Response to Global Economic Crisis. Argentina has weathered the global economic crisis relatively well to date, but the sharp decline in commodity prices combined with the world economic slowdown and the strengthening o f the peso relative to Argentina's main trading partners is affecting the economic outlook through its impact on the fiscal and external accounts. In this context, balance o f payment pressure (in particular, potential pressures on the exchange rate and capital flight) i s likely to be a source o f vulnerability in the medium-term. At the same time, Argentina still enjoys ample foreign reserves (US$46.4 billion at end 2008) that could help mitigate the impact of economic shocks. On the fiscal side, the key risk is that revenues are subject to further declines in commodity prices and lower than expected domestic growth, assuming primary expenditures remain contained, given the current need to maintain a countercyclical fiscal stance. 5. Indeed, in response to the deteriorating economic environment, the government i s taking several counter-cyclical policy measures to mitigate the negative impact o f the decline in private aggregate demand and to strengthen the social safety net system. These responses are limited given the authorities' objectives to preserve the primary fiscal surplus andexchange rate stability and confidence. 6. The medium-term macroeconomic framework (2008-20 10)2 incorporates the preliminary impact o f the global crisis on the Argentinean economy and the policy measures undertaken by the government inthe second half o f 2008 (the nationalization of the pension systemand the fiscal stimulus package inresponse to the crisis, inparticular, the increase in capital expenditures, and the recent local debt swap of Pre'stamos Garantizados). The CPS baseline macro projections are summarized below: 0 Growth and inflation. Growth i s expected to decline sharply in 2009 and 2010, from 7.0 percent to between 0 percent and 1 percent. Recent activity indicators have all shown sharp declines during the last quarter o f 2008. Official figures place inflation at 7.2 percent in 2008, whereas the GDP deflator i s o f 19.4 percent3. Inflation i s also likely to decline in 2009, but projections are subject to considerable uncertainty. Fiscal accounts. The primary fiscal surplus o f the central government is estimated to decline from 3.1 percent o f GDP by the end o f 2008 to about 1.8 percent in 2009 and 2.0 percent in 2010, before the effect o f the private pension takeover. Taking into account these additional resources, along with increased capital spending and other counter-cyclical fiscal measures implemented by the government, the primary fiscal surplus is projected at 2.4 percent in 2009 and 2.6 percent in2010. Macroeconomic projections assume an average soybean price of about US$330 a ton in 2009. CPI figures are contested by market analysts, thus the GDP Deflator is also provided. 31 0 Financing gap. Gross public sector4 financing needs are expected to remain broadly constant over the medium-term. They are estimated at US$16.3 billion in 2008 and are projected at US$15.8 billion and US$13.2 billion in2009 and 2010, respectively, taking into account the recent debt swap of Guaranteed Loans. The net financing gap of the federal government i s projected at about US$3.0 billion in 2009 and US$O.l billion in 2010, after taking into account the additional resources from the nationalized social security contributions. In addition, gross disbursements from IFIs including the World Bank are expected to amount to US$l.O-1.8 billion in 2009, with a remaining financing gap easily met from domestic sources. Argentina continues to lack access to international financial markets, although the Government remains committed to advance in the resolution of claims by the Paris Club and holdouts from a 2005 debt restructuring. 0 External accounts. The current account surplus i s expectedto deteriorate, but will remain marginally positive in2009 (0.1 percent of GDP) and 2010 (0.7 percent of GDP). In 2008, this surplus is estimated to have reached around 3 percent of GDP (2.9 percent in 2007). Due to recent volatility, gross international reserves declinedto US$46.4 billion by end-2008 (about 9.7 months of 2008 imports). 0 Monetary accounts. Money growth is expected to slow, reflecting weaker domestic demand. Real growth of net credit to the private sector is expected to decline from 11-4 percent in 2008 to -7.5 percent in 2009 and +1.O percent in 2010. The peso has depreciated from 3.14 pesos/US$ at end-December 2007 to 3.46 as of the end o f 2008. By end-February 2009 the exchange rate had reached 3.56 and is likely to depreciate further. Financial System. The Argentine banking system is generally well placed to face the international crisis. Bank liquidity is strong at 23 percent of deposits, compared to 17 percent a year ago. However, the flight to quality by investors has resulted in an increase inArgentina's already high financing costs with sharp decreases in domestic bond and stock prices and a substantial rise in the country risk premium. The capital markets remain underdeveloped, and the banking system i s too small to meet the needs of the economy. As of September 2008, private sector loans represented only 12 percent of GDP. Notwithstanding this analysis and given Argentina's history of financial volatility, the BCRA recently announced several measuresto bolster liquidity. 7. Downside Risks to the CPS Base Case. Given the uncertainty surrounding the global crisis, a more pessimistic scenario could entail further drops in commodity prices, and negative GDP growth for 2009 and 2010 (-3.0 percent and -2 percent, respectively, as a result of a sharp contraction inboth domestic and external demand. Inthis scenario, the exchange rate would likely depreciate substantially. The fall in output would also impact the fiscal accounts, and the primary fiscal surplus of the Federal Government IncludingFederaland ProvincialGovernments, 32 could be as low as 1.3 percent o f GDP. As a result, net financing needs could reach US$7.7 billion, doubling the projected financing needs inthe base case. 8. In sum, over the next eighteen months, Argentina will have to weather the global economic crisis. The main transmission channel is trade, since Argentina's fiscal and external positions remain vulnerable to swings in commodity and manufactured export volumes and prices. Given the uncertainty over the global macroeconomic outlook and the direction o f economic policies, the Government has a limited margin to use countercyclical policies. On the monetary front, with rapid exchange rate depreciation in neighboring countries the real exchange rate lost competitiveness as the central bank implementeda policy o f more controlled depreciation to contain financial volatility and inflationary pressures. Fiscal accounts are deteriorating although the government will likely manage to keep fiscal primary surpluses if growth o f primary expenditures i s contained. Inaddition, the global crisis has increased risk aversion, and that implies that Argentina will continue to have few financing options. While the Government will likely be able to meet its financing needs during 2009, Argentina's economic outlook in 2010 would be challenging if world economic conditions do not improve. At the same time, a large stock o f reserves and the primary fiscal surplus would help mitigate the negative impact o f potential economic shocks. SECTORBACKGROUND 9. Argentina's social protection policies have been traditionally focused on contributory social insurance schemes. From the outset, programs have been mainly tied to formal employment. Formal sector social insurance programs, including pensions, family allowances and unemployment evolved from early efforts by trade unions to cover their members. By the mid 1950s almost all formal workers were protected by pension programs, and in the early 1990s coverage o f social insurance programs was wide. However, many workers (and, by extension, their families) were excluded from these programs as they did not have formal jobs. 10. Non-contributory social protection programs have evolved more recently. While some programs existed before, the country's response to the 2001-02 economic and social crisis included the implementation o f a wide reaching emergency workfare program - Plan Jefes - which covered nearly 2 million beneficiaries (20 percent o f the county's households) at its peak in 2002. Since then, the number o f beneficiaries has declined, as some joined the formal labor force, and others transferred to the new "transitional" programs, Seguro (that provides income transfer and training and employment services) and Fumilius (that provides conditioned income transfers only). The total number o f beneficiaries inthese three programs is slightly over 1 million, as no new participants have been included since the original registration in2002-2003. 11. Income transfer programs offer protection against most social risks in Argentina, but access to them is not always easy. There are many programs in Argentina providing transfers for the elderly, unemployed, children, or poor. However, access requirements sometimes exclude vulnerable individuals and families from them. In the case o f social insurance schemes, participation in the formal labor force is a standard requirement, while, in the case o f non contributory schemes, access to some of the most important 33 programs have been closed for several years now. Table Al.l presents a quick summary o fthe main programs. 12. SpendinginJefes reached as much as 1 percent o f GDP in2003, but has declined since then. Total spending in income transfers in Argentina has been very stable at 8-9 percent o f GDP since the mid 1990s. However, the participation o f non contributory benefits on this amount went from less than 5 percent in 1995 to 23 percent in 2003, but has declined since then to around 10 percent (including the non contributory pensions). Spending in Jefes, Seguro, and Familias in 2008 was around 0.3 percent o f GDP. This decline i s the result o f a reduction in the number o f beneficiaries (either because they found a formal job or they became ineligible), and a decline inreal value o f benefits. 13. The core challenges o f the social protection sector incoming years are to expand coverage and accessibility, and consolidate long term programs, with a special focus on children and the unemployed and informal workers. Informality and unemployment have continued to be significant after the important improvements observed inrecent years. By the late 199Os, before the onset o f the crisis, less than 40 percent o f the labor force was employed in a formal, salaried job, while the rest were independent, informal or unemployed. This proportion declined below 35 percent at the worst o f the crisis, and has improved since then to over 40 percent. Informality and unemployment affect more often households with children, who are consequently more affected by poverty. FigureAl.l. Evolutionand breakdownof public expenditureson incometransfer programs Spendingin Income Transfers us % of GDP Breakdown of Spending I -_____._ ___._______ _ 10% lW% 8Trabajar, Jefer, Familiar, Segura 8 Unemployment 80% Insurance OFamlly a IIowa"cas F3 Non- - -~ .. contrhutnry pensions -~ 6% 0 Pensions 5% - r- r- age and I 0% m m 7 m ..- .- In m 0 m 0 In 0 0 survivor) m t. m r n m N 0 0 N 0 N 0 N m m m 3o o o m m m o o o 0o rl r l r l N N N N Source: World Bank staffbasedon Ministry ofEconomy and ANSES. 14. The effects o f the global economic crisis will probably add pressure to the social protection programs in Argentina. By 2006, only 12 percent o f households in the lowest two income quintiles were receiving income transfers. Ifthe global crisis results inhigher unemployment and informality, part o f the improvements in welfare achieved during recent years might be lost, and pressure on social programs to provide income transfers to the poorer households will increase. Short o f responding with new emergency programs, 34 authorities could expand the existing schemes to include those more exposed to these risks, that is, children and unemployed workers. In that context, the Family Allowances program and the Seguro seem to be two o f the most appropriate choices, as they already have the implementation arrangements in place, and are targeted to the relevant population 15. The 2002 crisis demonstrated the importance o f having a social protection system able to respond effectively to short-term shocks. The response to the crisis was effective, but most policies and programs were not in place and had to be designed and implemented in a hurry, resulting in unnecessary delays and problems. This experience has provided an important lesson for policy makers in Argentina. Rapid response to critical situations i s very difficult to implement, unless institutions, programs, and instruments are already in place, providing poverty alleviation to those in need, and can be scaled up ifnecessary. 35 Table Al.l. IncomeTransferProgramsinArgentina.Basicdescriptionas of2008 SF;:$ Implementin Program Description Duration Eligibility Number Of of benefits Financing source Beneficiaries (approx) (est.) g agency Contributory 5,400,000 6% GDP Retirementage: 60165 (employee ANSES (womenimen) and National Old Age, Survivors and (National Vestingperiod:30 employer). Pension Disability benefits, lndefinitc administration yrs. Disability and Deficit System financed through PAYG covered of Social scheme Survivors: Vesting Security) periodof 18 through months general taxes. Contributory 37,000 Old Age, Survivors and 1YoGDP (employee Provincial Disability benefits, Varies, by Provincial province, similar and pension financed through PAYG Indefinite pension to National employer systems scheme, for provincial agencies contribution) civil servants System 7 benefits (pregnancy, 5,000,000 0.7% ANSES For child Contributory GDP (Private Family birth, adoption,per benefits, Formal salaried (employer sector) allowances children, disabled workers contribution) children,school support, until 18 Government marriage) years old. (public sector) Formalsalaried 114,000 0.05% workers not in the Contributory GDP Unemploy- Unemployment benefit, agriculture or (employer ment decreasingintime. 4 to 12 ANSES contribution) insurance Compatible with family months. public sector. allowances Vestingperiod:6 months 776,000 0.4% Ministry of Non- 3 benefits (old age, SP benefits: Social Non- GDP contributory special laws, social Indefinite Disabled or older Development contributory pension protection) than 70 and poor (MDS) - ANSES 0.1% Cashtransfer program While Unemployedhead 500,000 Ministry of Jefes de GDP for children of householdwith Non- Labor, hogar unemployed/informal are childrenyounger contributory (MTESS) - heads of household younger ANSES than 18 than 18. Unemployedhead 600,000 0.2% CCT, conditionalto of householdwith Non- GDP Familias school attendance and MDS medical checks for Indefinite two or more contributory children. childrenyounger than 18. 0.03% Seguro de 72,900 Incometransfer andto Unemployedhead of householdthat Non- GDP Capacitacibn training and active labor maximum MTESS y Empleo services 2 years participated in the contributory Jefes program. Provincial Cash transfers, linked to nla nla Income poverty alleviation, food varies by Provincial varies by program Non- Transfer distribution and program contributory governments Programs workfare policies Source: World Bank staff, based on legislation SEGURO: EMPLOYMENT BENEFITAND TRAINING 16. In October 2004, the Government of Argentina decided on a two-pronged transition strategy for the Heads of Household Program to be jointly managed by the Ministries of Social Development and Labor. The key underlying strategy was to distinguish among the current beneficiaries those who had higher re-employment possibilities from those for whom a different type of longer-term safety net, linked to building human capital for children would be more appropriate. The strategy was 36 `transitional' as it aimed to support and test approaches to raise beneficiaries' employment prospects, while at the same time facilitating the transfer o f other beneficiaries from the current Heads o f HouseholdProgram to other programs. The main aspects o f the transition strategy included inDecree 1506/04 were: a) To promote a culture o f work among those beneficiaries capable o f working, promoting their insertion into the labor market, and orienting the program towards that goal. b) To decrease the vulnerability of families, particularly those with numerous small children, who have more structural disadvantages (low education levels, for example). 17. The Ministries of Labor and Social Development were to jointly define guidelines and criteria to assist in the implementation o f this transition, defining the prerequisites and profiles for the programs. Beneficiaries considered to be more employable would continue to receive assistance from the Ministry o f Labor, which would provide services to promote insertion into the labor market (e.g. temporary employment, training, and promotion o f private employment), while the remaining beneficiaries would be incorporated into programs directed at vulnerable groups, income support and human development created, or to be created in the Ministry o f Social Development. An important aim of the transition Strategy was to increase the number o f participants who improve their employability by undertaking activities designed to try to help them get jobs. 18. On March 29,2006, the Government announced further measures inthe transition strategy though the creation of a non-contributory Seguro de Capacitacidn y Empleo program (Seguro, Employment Benefit and Training), in Decree 336/06. Initially Seguro would only be available to current Heads o f Household Program beneficiaries who voluntarily opt to switch to the new program. Seguro includes a higher monthly stipend (AR$225) than Heads o f Household (which continued to be AR$l50), and accrual of benefits in the pension system, but was time-bound (2 years) and required the signing o f an individual agreement stipulating specific conditions under which the stipend could be maintained. The training and employment insurance i s an important part o f the transition strategy for the Heads o f Household Program which had has one o f its aims improving employability. Seguro started in April 2006 in about 10 municipalities with a gradual expansion thereafter. Seguro was introduced to assist the beneficiaries o f the emergency program Heads o f Household Program to reenter the labor market in better conditions. It combines a cash benefit with active labor market support, through a combination o fjob- search assistance and training. 37 FigureA1.2. Trends inTransitionStrategy for HeadsofHouseholds5 May 2002 December 2008 - 1,000,000 2,500,000 HH Beneficiaries (Right Axis) +-Transfer to Seguro +Transfer to Familias 800,000 2,000,000 600,000 1,500,000 400,000 1,000,000 200,000 500,000 Source: Ministry of Labor. 19. The Ministry of Labor, Employment and Social Security (MTESS) is the agency responsible for managing Seguro through bilateral agreements with provinces, the City of Buenos Aires, and municipalities. The municipalities have the key role for the implementation. Seguro is implemented by the Ministry of Labor through local Employment Offices which are responsible for organizing employment services and linking participants to basic education, and training courses, while income transfers are managed centrally. Participating local governments are required to have strategies for coordinating local development, employment and professional training policies. 20. Potential beneficiaries of Seguro apply for the program through municipal Employment Offices (EO) that are part of the Network of Employment Services promoted and supported by MTESS. At this time, only those receiving benefits from the Jefes program can apply. Following an interview to collect background informationabout past employment, education and training, applicants sign a contract establishing their rights and obligations under the program (regular contact with municipal employment offices; mandatory job search; participation in training, education courses, labor orientation; obligation to accept qualified job offers, etc.). Job history information, as well as records of participants' activities are registered in an electronic management information system (MIS)at MTESS. This isjust trends in the transition strategy. It does not include exits to formal employment or other reasons. 38 21. Participation in the program i s limited to two years. Cash benefits are AR$225 duringthe first 18 months and AR$200 duringthe last 6 months. Inaddition, participants receive job search support through municipal Employment Offices and the network of employment services, including: labor intermediation services for public and private sector employment, basic and professional training, participation in training course, and technical assistance for starting small businesses. In addition to the monthly payment to participants, the Seguro provides a per diem transfer, to finance inputs and transportation expenses in order to facilitate participation in education and training activities, as well as other small out o f pocket expenses. Thus, participants enrolled in training or education activities may receive up to AR$50 more per month, for a maximum o f 6 to 8 months. A parallel, much smaller program promotes hiring Seguro participants by public sector offices. In those cases, beneficiaries receive an additional monthly transfer o f up to AR$600 that is part o f their salary (thus, this is a temporary employment subsidy to public agencies). 22. The active component o f the program i s managed by municipal Employment Offices, which provide a range o f labor market services including: (a) job search assistance and orientation; (b) labor market intermediation with both private and public sector employers; (c) services to employers (d) technical assistance for starting a small business. By the end o f 2008, 181 municipal Employment Offices (including 50 included during that year) were offering services linked to the Seguro. The Employment Offices also coordinate and refer the participants to basic education, professionaltraining andjob training activities. Municipalities guarantee several basic services for Seguro beneficiaries: they collect information on their labor history, supervise their job search, offer short workshops onjob search or labor orientation and/or referrals to other available activities (job placement, support for self-employment, training, completion o f basic education, or placement in temporary work). The information is registered in a management system and performance i s regularly supervised by the Ministry o f Labor through its provincial agencies. 23. By the end of 2008, approximately 115,000 workers had participated in Seguro. Nearly 77.1 percent o f participants are women (compared with 73 percent among Jefes). Average age and educational attainment are also higher in Seguro. Since Seguro's benefits last a maximum o f two years and the program started implementation in early 2006, nearly 17,000 beneficiaries have already completed their term and other 12,000 have left the program for other reasons (such as retirement or because they found a regular, formal job), leaving nearly 78,000 active participants currently. As Figure Al.3 shows, among Seguro beneficiaries who exited the program, 58.7 percent exited because o f the two-year time limit, 26.7 percent exited because they obtained a formal job, and 10 percent exitedbecause they were able to access a pension benefit. 39 Figure A1.3. Participants leavingSeguro, by reason 33,000 Cumulative 30,000 w Non contributorypension or retirementbenefit Enter into formal work \Endofcontract 27,000 24,000 21,000 18,000 15,000 12,000 9,000 6,000 3,000 0 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 Source: Ministry of Labor 24. Complaints System: The Secretary of Employment has a system for handling complaints and accusations of fraud in the Program. The system operates through the internet, procedures have been simplified and shortened, and localities and beneficiaries can access information to check on the stage of processing of complaints in their own area. The work is coordinated with the Call Center (a free phone number is provided) which is the main source of channeling fraud accusations in the Program. The system receives: a. Requests for information: A system of standard messages developed to answer frequently asked questions using taped responses, such as dates of payment; and b. Fraud claims: A system working with CODEM (Commission for Fraud in Employment Programs); where a process to deal with claims and fraud has been standardized to ensure that enough information is collected to follow UP* 25. Claims and fraud allegations can be made through the Call Center, directly to CODEM (via e-mail or personally), and in the provincial offices of employment. From October 2006 to January 2009, (CODEM) of the Ministry of Labor received 56 allegations concerning Seguro. 40 FuturePlans 26. The MTESS plans to continue expanding coverage of Seguro among Jefes beneficiaries, by transferring approximately 4,000 beneficiaries per month (until now the transfers to Seguro have averaged only 2,500 beneficiaries monthly), or 50,000 per year. Considering that participants will continue to complete their 2-year term or leave the program before that, this estimate implies that the total number of beneficiaries should reach 110,000 by the end of 2009; and 140,000 by the end of 2010. 27. The number of Employment Offices is also expected to grow. As of the end of 2008, there where 260 municipal Employment Offices in the network of employment services, but only 189 of those provide access to Seguro. Inorder to avoid bottlenecks in the provision of services, Ministry authorities plan to expand gradually this number, to reach 250 by the end of 2009, 300 by 2010 and 350 by 2011. Increasing the number of offices will allow more participants to be incorporated inthe program. 28. The Ministry plans to expand the number of participants to include not only more of the current target population of Jefes beneficiaries, but eventually, other unemployed individuals who do not receive Jefes benefits. The Ministry is also considering an increase in the cash benefit amount of the program improving income transfers, through an incentive scheme: 29. According to data from the Ministry almost a third of the participants in Seguro are assigned to or have chosen some specific activity to improve their employability, mainly education or professional training. Efforts would be made to increase the level of benefit for these the participants, as well as to improve the extent to which this informationis recorded inthe management information system. 30. Various challenges exist for the future expansion of Seguro. On the one hand, as mentioned, participation is voluntary. In addition, so far municipalities also can decide whether or not to make available and promote Seguro. There is currently a fairly large gap between the number of Employment Offices and the number of municipalities that provide Seguro. Municipalities do not strong incentives to encourage the transfer since it impliesconsiderable an institutional effort for them (e.g. to set upthe Employment Office and establish the network of resources and services for the insured, strengthenrelations with the sector employer, etc.). In this context, 4,000 new participants per month into Seguro is feasible, but is quite a bit higher than the average since the program started. 31. The Ministry is implementing a similar scheme of incentives for the Youth Program to include young people in the labor market, financed through the Lifelong Learning Project. Implementation has presented challenges with regard to the development of the information management system and monitoring of results. The management system is the same for both programs and the Youth Program is also implementedthrough the Employment Offices. Although the Ministry is very advanced in the development of the informationplatform which will possible the incorporation of information on the results of the employment activities, there is still no specific evidence on this issue. Even so, the Project undoubtedly will benefit from this experience. 32. In addition to the expanded benefit amounts, MTESS also plans to expand the opportunities for participation in active labor market programs offered at the local level, 41 including professional and technical training at the provincial and municipal level, and through NGOs. The MTESS also plans a major effort to strengthenthe overall role of the Employment Offices and particularly their capacity to support job search and provide labor market information. 33. The Loan will finance approximately 60 percent o f the program's annual budget for 2009. According to the National Budget for 2009, authorities plan to spend approximately AR$477.7 million in 2009, close to US$135 million. O f those, AR$459 million would be income transfers, o f which the loan would finance approximately 60 percent. The Bank i s currently supporting the transition process to switch beneficiaries from Jefes to Seguro and plans to provide, through the Heads o f Household Transition loan (Loan 7369-AR), approximately US$15 million for this shift in 2009. Thus, including financing from both loans, the Bank would finance approximately 70 percent o f all program expenditures. 34. By providing financial support to the income transfers component o f Seguro, the loan will contribute to a more rapid expansion o f the program. Support o f additional benefits i s considered critical, as it provides an incentive to authorities to expand the number o f participants enrolled intraining and educationprograms. The loan will support the Government to advance in the implementation of its strategy to tackle poverty and expand employment. Seguro i s a core element on the strategy to increase employability among former Jefes beneficiaries, as it provides training and job placement services while maintaining a basic income for unemployed workers. FAMILYALLOWANCES 35. This section describes the Family Allowances (AAFF) program. There are nine types o f benefits are paid to formal workers, unemployed and pensioners. This program amounted to 0.7 percent o f GDP in 2008 and pays nearly 5 million child benefits per month. This last type o f benefit represents approximately 70 percent o f all expenditure on AAFF, paying a flat amount o f AR$135 (US$40) per child. This contributory program is targeted on the lowest 85 percent o f the formal workers. Benefit amounts vary with the worker's wage (or pensiodunemployment benefit) and area o f workhesidence. The program i s managed by the National Social Security Agency (ANSES), an institution that i s currently changing the payment method through which beneficiaries (formal salaried workers in the private sector) receive the transfers. The traditional "compensatory fund" i s being replaced by the more transparent SUAF, also called denominated "direct payment method"6. 36. The evolution o f the Family Allowances (AAFF) program i s similar to the pension system inArgentina. The first family allowances benefits were introduced as part o f a series o f agreements between unions and employers at the industry level. Employers financed these benefits collectively, through a compensation system. Thus, each employer would pay the corresponding allowances to his workers, and then differences among employers would be compensated. The first maternity benefit dates back from SUM standsfor Unique System ofFamily Allowances(acronymin Spanish). 42 1934, and the first child benefit from 19407.Both benefits were originally paid to banking sector workers only. In 1956, the retail commerce sector formally created a compensatory fund, which was afterwards imitated by most other industries. The public administration also adopted a family allowances scheme, but in this case benefits were paid directly by the Government, as part of the payroll system. Together with the institutional reforms of the pension system inthe late 1 9 6 0 ~ ~administrative reform grouped the compensation an funds into three main ones: Commerce, Private Sector, and Maritime industries. Spending on AAFF reached as much as 2 percent o f GDP during the 1970s, when higher benefits were paid to all salaried workers, and pensioners had the right to participate on the program. Self-employed workers, as well as informal workers and inactive families have never participated in the system. In 1991, these three funds were consolidated into one program, administered by the newly created ANSES. Only civil servants and private sector teachers/professors continue to be excluded from the consolidated system as o f 2008. 37. Law 24,714 introduced a major reform to the system in 1996, excluding higher income workers from the program (although their employers were required to contribute anyway). Both eligibility and benefit amounts were targeted using an income level criterion. This reform reduced the overall spending in the program, which still concentrated mostly on child benefits. Three benefit levels were created, declining for higher income workers. This scheme resulted ina distributional effect, with income going from workers without dependants to families, as well as from higher income to lower income families. In recent years, the parameters that set the wage limits and the benefits have increased. Finally, there is geographical coefficient that increases the amount o f the benefit for workers living inPatagonia, although the number o f beneficiaries inthis group i s small. With the reduction in the number o f benefits, the decline in real value o f allowances, and the targeting scheme introduced in 1996, spending has declined. 38. In 2008, the consolidated AAFF program (excluding civil servants) spent AR$7,476 million, equivalent to 0.70 percent o f GDP. Figure A1.4 shows that the relative size of the AAFF program i s slightly lower than the one reported at the end o f the nineties but significantly higher than the 2004 value when the series hit a 0.5 percent low. The extension o f the program is basically explained by the increase inthe amount o f the benefits paid by the program. 39. The AAFF benefits are paid through different methods. Active workers receive these benefits either from the employer through the payroll (compensatory fund), from ANSES (direct payment). Workers in the civil service also receive AAFF benefits through the payroll but use a compensatory fund restricted to salaried workers in the federal, provincial or municipal governments. Unfortunately, data are available (or easily accessible) only for the former'. 40. The SUAF is responsible for half the expenditure on AAFF benefits. The compensatory fund still holds 33 percent o f total AAFF expenditure. The Pension system (10 percent), the Unemployment Insurance (2 percent) and the Federal Government (5 'For a more thorough description see Mesa Lago (1977), Isuani (1985), Chebez (1992), Llach and Kritz (1997), Rofman, Grushka and Chebez (2001),and Rocher and Marasco (2005). * Teachersand professors working for the private educationsector also receive their benefitsfrom an exclusive compensatory fund. Nevertheless the data is reportedjointly with the rest of the private sector. 43 percent) explain the rest o f the AAFF expenditure. Almost 70 percent o f SUAF expenditure was paid on child benefit, while school support was responsible for 10 percent o f that spending. Both Maternity and Disabled children's benefits account for 4 percent o f the SUAF expenditure. Although no precise data are available for the compensatory fund the proportions should be similar given that they share the same benefit structure. Given that pensioners and unemployed people are eligible for a restricted set o f benefits (Le. spouse for pensioners), the composition o f total AAFF expenditures is slightly different than SUAF. N o qualitative differences are observed, though. Figure A1.4. Expenditureson Family Allowancesby subprogram,as YOof GDP 1998-2008 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -t Compensatory Fund ISUAF %: UI 181 Pensions 0 FedGovt* * No information is available for provincial of municipal governments 41. Family Allowances are financed by a payroll tax. During the 1970s and early 1980s, the tax rate reached a maximumlevel o f 12 percent o f salaries, but was reduced to 9 percent in 1985. The introduction o f the Unemployment Insurance in 1992 further reduced the resources to finance Family Allowances to 7.5 percent o f the formal workers wage bill. In 1993 a policy aimed at introducing incentives for job creation further reduced payroll taxes affecting the revenues collected to pay the program benefits. By the late 199Os, contribution rates for Family Allowances varied by region, with a minimum o f 1.5 percent and a maximum o f 5.25 percent. Most o f these reductions were eliminated inrecent years, and contribution rates are currently back at their 7.5 percent levelg. Given Only some workers in the service sector are allowed to pay a smaller payroll tax. 44 the 2008 wage bill, the AAFF program (isolated from the rest o f the social security programs) would be running surpluseslo. Nevertheless, all social security programs are grouped together by ANSES. 42. In 2008, an average of 2 million children received a monthly AAFF benefit through the SUAF (the figure edged towards 2.4 million by the end o f the year). ANSES paid benefits another 180 thousand children through the unemployment insurance and the pension programs. Unfortunately, the information i s neither available for the compensatory fund, nor for the civil service. A rough estimation would say that another 2 million was covered by the former and 1 million for the latter. ANSES pays 100thousand AAFF benefits to disabled children, adding up SUAF and other payment methods. Nearly 80 percent o f the children receiving AAFF benefits through the SUAF are also receiving school support benefits. It i s likely that most o f the difference i s explained by the children younger that five. On average, ANSES pays 650 thousand spouse benefits, exclusively to pensioners. The amount o f this last benefit i s relatively small. Table A1.2. Number of benefitspaid by the Family Allowances program (benefits paid directly by ANSES), 2008 SUAF UI+Pensions+former PF year total monthly average year total monthly average Child 24,634,823 2,052,902 2,180,802 181,733 Disable child 367,170 30,597 940,599 78,383 Spouse 7,821,291 651,774 Pregnancy 486,979 40,582 29,605 2,467 Maternity - 105,344 8,779 School support 1,625,512 85,444 Birth 187,407 Adoption 581 Marriage 59,420 Source: ANSES 43. As of 2008, nine benefits o f the AAFF program were available: Child, Disabled child, Spouse, Pregnancy, Maternity, School support, Birth, Adoption, Marriage. The first three benefits are paid monthly. The Spouse benefit i s only payable to male pensioners. Pregnancy and Maternity are paid up to a maximum o f 9 and 3 months, respectively. The amount o f the Pregnancy benefit i s equivalent to Child benefit, while through the Maternity benefit women get paid an amount equivalent to her gross wage. The last four benefits are paid once a year or every time the event occurs (Adoption, Birth, Marriage). Although it i s stated that School support i s payable upon the certification o f school attendance, inpractice the benefit is paid to all children with schooling age. 44. The most important benefit (Child) pays, since September 2008, AR$135 per child to most beneficiaries, with some exceptions by salary level and region o f residence. According to 2007 data, out o f the 6.6 million formal workers, 60 percent were eligible to earn the highest child benefit. The other two categories held 19 percent and 9 percent respectively, and 12 percent were not eligible due to their relatively high wages. The loAs of 2008, 7 million salaried workers contributeda monthly wage of ~ ~ $ 2 , 3 0 0which gives an annual contribution , (7.5 percent) of AR$ 15 billion, equivalent to 1.4 percentof GDP. 45 Disabled child benefit pays nearly four times more than the Child benefit. School support benefit is paid once a year, and it's flat across income levels and slightly higher than the Child benefit. Similarly the Maternity benefit does not present targeting restrictions. Marriage, Birthand Adoption are also flat across income levels. Table A1.3. Amount paid (AR$) by type of benefit. September 2008 Amount of wage, benefit (unemployment or AR$ 100- ARt2401- AR$3600- AR$ 4800+ Note 2400 3600 4800 pension) Pregnancy 135 102 68 0 Variable acrossthe 4 regions Maternity gross wage Noincomeceiling Child 135 102 68 0 Variable across the 4 regions Disablechild 540 405 270 0 Variable acrossthe 4 regions Spouse 41 Pensioneersonly, variable across two reaions ...- '-I.-.- Marriage 900 0 Botheligible Birth 600 0 Flat across regions Adoption 3600 0 Flat across regions School support 170 0 Variable acrossthe 4 regions 45. As in other social security programs, there is no indexation rule for the benefits amount' '.Sincethe 2001-02 economic crisis, real value o f allowances were affected and adjustments were applied with no regular criteria. Figure A1.5 shows that the process o f updating wage band limits and benefit amounts followed wage increases in a rather discretionary manner. As nominal wages started rising since 2002, workers lost their eligible status or shifted from wage bands, receiving smaller benefits per child. In fact, the 2004 parametric modification changed the wage band limits without altering the benefit amounts. Since 2007, the parametric adjustments modified both wage band limits and benefit amounts. Notice that not all benefits increased at the same moment. School support benefit remained unaltered between September 1996 and March 2008 at a nominal value of AR$130. Along the same period Child benefits experienced four increments. In 1996 the School support benefit was equivalent to 3.25 times the largest Child benefit, contrasting with the current 1.25 relation. "Theonlyexemptionisthepensionsystem(thelargestSocialProtectionprogram),whoseindexationrulewas approvedby Congress in November 2008. 46 Figure A 1 5 Wage bands, benefit amounts and average wage. 1996-2008 5000 4500 4000 3500 T3000 .-cE2500 I 0. 0: a2000 1500 1000 500 n 0wageband3 ';wage band 2 'X wage band 1 0lower limit Oaverage wage 3.500.0 160 3,000.0 140 2,500.0 120 = .-z 2,000.0 = m 1005 O E c E I 5 61,500.0 80 a a 60 1,000.0 500.0 I 1 - - average wage (left axis) - I - children, pregnancy (wbl) children, pregnancy (wb2) -A- children, pregnancy (wb3) school support 47 46. Some o f the benefits o f the AAFF program pay a differential amount depending on the geographical region o f residence. Given that these benefits vary also regarding the worker's wage (or pensionerhnemployed income transfer), the combination o f both provides a varied spectrum o f child benefits amounts. Figure A1.6 shows the differences according to both dimensions applicable since September 2008. The mode o f the child benefit distributions is AR$135. The latter is explained by the right-tailed wage income distribution and the fact that the most densely populated areas are included in the Zone Cero (also denominated "general value"). Originally thought to compensate for the geographical income differences (especially in the southern Patagonia region), the number of provinces and departments that enjoy this differences has been slowly decreasing, tending to a flat benefit at the Zone Cero values. FigureA1.6. Child benefitsby geographicalregionandwage band.Applicablesince Sept. 2008 I Cruz, Tierra del Fuego) (Catamarca;, Z2 (Chubut) Salta', Jujuy', Itband AR$) jGeographicalzonel Santa Cruz, Neuquen, Rio Zone Cero Tierra del Negro, Salts*, Fuego) Formosa;, Mendoza.) *Some departments of the province. ** Only for Child and Pregnancy benefits 47. In the mid 199Os, authorities began to replace the traditional compensation scheme with a "direct payment" system, through a program called SUAF. Since the origins o f Family Allowances, employers would pay the benefits together with wages, and cover these payments with their social security contributions. This model was criticized, as it was very difficult to control and data would not be readily accessible to authoritiesI2. The implementation of SUAF implied that employers make the full contribution to the ANSES as with any other contributory scheme, and then ANSES pays '* Infact, even as of today ANSES is not ableto reportwith accuracy the number beneficiariesunder the compensatory scheme. 48 the benefits to workers directly. In most cases, the system was implemented in firms where workers were receiving their salaries through a bank account, so that ANSES could simply transfer the allowancesto the workers account periodically. 48. ANSES has been slowly increasing the number of firms and workers covered by SUAF since 2003, when less than 300,000 Child benefits were paidthrough this system. By the end of 2008, the figure had reached 2.4 million, representing nearly fifty percent of all benefits, including those paid directly by the Federal or local governments as employers, or sixty percent of ANSES' managed benefits. Advances in this reform have been critical to increase accountability in the system, and also provides ANSES with the authority to include additional beneficiaries into the system, regardless of their employment status. 49. The series of participation of SUAF on all Family Allowances paymentsto active workers clearly shows a growing trend since 2003. Data has a strong seasonality effect, mostly due to the fact that the once-a-year school benefit is not paid at the same time to all workers. Figure A1.7 shows that between 1997 and 2008 SUAF increased its participation in total expenditure from 15 percent to 70 percent, among formal salaried workers inthe private sector. The rest of the payment methods decreased also its relative importance. This figure is highly volatile due to the impact of some benefits that are paid once a year. Thus, a more stable series, showing a twelve-month moving average, i s includedinthe figure. 50. Started as an exception to the rule, the method of direct payment has become the core strategy to simplifL bureaucratic procedures while reducing the risk of fraud. In March 2008 ANSES issued Resolution 292 establishing that SUAF would become the only acceptable method available for the payment and control of the benefits of the AAFF program in the future. The transition to complete the switch to SUAF for all employers would be implementedprogressively. Some new rules, including that all new firms are required to registered in SUAF, and that firms operating through the compensatory fund are requiredto switch if their net contributions are negative, resulted in a progressive expansion of SUAF. Gradualism is necessary to ensure that ANSES systems would not overload, and that the transition would be implementedina controlled environment, but the program is expectedto be fully implemented by 2011. 49 Figure A1.7. Family Allowances expenditure by payment method (formal salaried workers inthe private sector) 1997-2008 100% 80% 60% 40% 20% 0% SUAF E 3 CompensatoryFund -Avg last 12 months 51. Complaint process: Formal salaried workers whose employers are enrolled in SUAF can claim their benefits (ifthey did not receive it but believe to be eligible) using three alternative ways: a) inperson at an ANSES local office; b) over the phone through a call-free calling center; c) or via e-mail to denuncias@anses.nov.ar. Inall three cases, the operator checks whether the claimant holds the necessary information (and provides additional information if necessary), and proceeds to do an on-line check on the ANSES' database for his or her recorded information. Two mutually exclusive answers can result. First, if the operator cannot find out the reason why the person did not receive the payment, the claim i s submitted to the Gerencia de Asignaciones Familiares. This department includes the claim in the monthly eligibility check and proceeds to either: i) include the payment in the next payment process, or; ii)inform the operator the reasons why the claimant is not eligible to receive the benefit payment. In case ii)occurs, the claimant i s informed the reasons for ineligibility. Second, in case the operator considers the claimant should have been paid the benefit (when did not), he/she sends the case directly to the current eligibility process. In case the case results successfully the beneficiary i s paid retroactively the corresponding amount on the following payment round. 52. The loan is expected to finance the equivalent of 790,000 benefits per month, at a per capita value o f AR$l35, for a total o f AR$107 million /month or AR$1,280 million a 50 year, equivalent to US$365 million. This amount representsapproximately 14 percent of total spending on Family Allowances (including SUAF and compensations, but not civil servants), 24 percent of payments through SUAF and 31 percent of payments of Child benefitsby SUAF, respectively. 51 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies ARGENTINA: Basic ProtectionProject Sector Issue Project Latest Supervision(ISR) Ratings (Bank-financedProjectsonly) Implementation Development Progress (IP) Objective (DO) Bank-financed Emergency Workfare Social Protection VI Completed (S) S Project Jefes de hogar - (Heads of Household) 7157-AR Transition from Emergency Heads of Household Ongoing (S) S Workfare Transition Loan 7369- AR Vocational Training Lifelong Learning Ongoing (MS) MS Project - Loan 7474- AR Institutional Reengineering Institutional Ongoing (S) S Strengthening - ANSES I1TA 7318-AR Other Agencies Training and Employment FORMUJER (IDB) Completed Services for Poor Women Conditional Transfer Program Support for Plan Ongoing Familias I(IDB) Conditional Transfer Program Programa de Apoyo a1 Planned Sistema de Proteccidn e Inclusidn Social- Fase I (IDB) Transition from Emergency Support to Heads of Ongoing Workfare HouseholdTransition Loan (UNDP) Vocational Training Support to Lifelong ,Ongoing Learning Project (UNW Education for young people EuropeanUnion Planned focused on the National Labor Market 52 Annex 3: ResultsFrameworkand Monitoring ARGENTINA: BasicProtectionProject ResultsFramework 1. This Annex describes the results framework (outcomes and intermediate indicators detailed in Table A3.1) and the monitoring indicators and how they relate to the outcome indicators and the individual components of the proposedProject (Table A3- 2)* 2. The Government and the Bank also agreed on the following results framework which would be used to assess whether the proposed Project achieves its overall development objectives and how intermediate results, by component, would be used. TableA3.1. ResultsFramework PDO ProjectOutcome Use of ProjectOutcome Indicators Information The Project Development Numberof Seguro Assessment ofSeguro's Objective is to increasethe beneficiaries exiting into effectivenessin supporting effectiveness of Argentina's formal employment reentry of participantsin labor income transfer programs for the Percentageof beneficiaries of market unemployedand families with Seguro participatingin children,by expandingthe training, education, or number o fparticipants and employment support improvingdesignfeatures, activities. transparencyand accountability Percentageof spending in Consolidationof SUAF program intwo core social protection Family Allowances paid as the only channel for ANSES to programs throughdirectpayment pay Family Allowances system. (12-month moving average). IntermediateOutcomes IntermediateOutcome Use of Intermediate Indicators OutcomeMonitoring Component I:Employmentand Training Insurance Program Expandthe Seguro program, Numberof beneficiaries of includingthe cash benefit and Seguro Check access ofparticipantsto availability oftraining and basic employment services, training education services. Numberof EmploymentOffices and educationservicesand providing Seguro services. proposeadjustmentsto the Increase access to Employment program ifnecessary. Offices and the availability of employment services. Component 11: Family Allowances Shift to direct payment of Family Number of firms registeredin Monitor the shift to direct Allowances (by SUAF). SUAF paymentsand adjust as necessary. Increaseefficiency of the delivery Amounts claimed to ANSES for Assess the caDacitv of ANSES to 53 of Family Allowances. reimbursement when allowances introducereformsin order to Provideincome support to to be compensatedexceed extend coverage working families with children expected contributions; and protect them from poverty. Number of child allowance Separatepayment of wages and benefits paidby ANSES through incometransfers from the AAFF SUAF; program Number of SUAF beneficiaries receivingtheir transfers directly intheir bank accounts Component111: Technical Assistancefor the Social ProtectionSystem Improvethe availability of data Social protectionsurvey is for monitoringsocial protection designedand implemented. Regularanalysis of coverage, programs. targetingand impact of programs. Strengthen capacity of the Indicatorson the coverage, Ministry of Laborto analyze targetingand adequacy of income policy design and outcomes. transfer programs are available. ARRANGEMENTS FORRESULTSMONITORING 3. The results monitoring framework builds on the experience o f the Government o f Argentina and the World Bank during the implementation o f previous and existing projects, including especially, the Heads o f Household, Heads o f Household Transition, and Lifelong Learning. Monitoring o f Component 1 (Seguro) and Component 2 (Family Allowances) will be based on the existing administrative systems and databases that exist for both programs - in MTESS, for Seguro, and ANSES, for Family Allowances. The arrangements are discussed below. 4. Component 3 (Technical Assistance) will contribute to the results framework of this Project by improving the information base on income transfer programs and Seguro and Family Allowances inparticular. The Component will finance the implementation o f a new survey for analysis o f social protection programs; as well invest in improvements inthe existing information systems. ComponentI:Seguro, EmploymentBenefit and TrainingProgram 5. The impacts o f the Project will be monitored with the help o f a set o f indicators which track the overall development o f the Seguro (Employment Benefit and Training Program), continuing the monitoring model currently applied under the Jefes Transition operation. The Ministry o f Labor will consolidate the data on a monthly basis and transmit it to the Ministry o f Economy and the Bank. This information will enable the Ministry and the Bank to closely monitor trends in transfer payments, participation, overall compliance with eligibility criteria, and exits from the program by reason. Based on the experience o f the ongoing Heads o f Household Transition Project, this data will 54 include information on the number o f people dropped from the Program, detailing the causes, and will allow for monitoring compliance with the rules o f the Program (e.g. suspending benefits for participants who no longer meet the requirements o f the Program). It will also allow for cross-checking across the Ministry's databases. 6. The Management Information System (MIS) is central to the execution and management o f beneficiaries transferring from Jefes to Seguro, the number o f participants completing training, or attending education programs who receive certifications would be registered by the implementing entities (municipal Employment Offices) inthe MIS and validated by MTESS. 7. The existing MIS was created to monitor the Heads o f Household Program, including data on beneficiaries as well as information on individual compliance with employment, education, and training requirements. The Directorate o f Information Systems o f MTESS has improved the MIS, expanding it to incorporate data on municipal employment services and lifelong learning and training activities. These efforts have been supported under the earlier Bank projects (Heads o f Household Transition and Lifelong Learning). 8. Most data for monitoring Seguro will be drawn from the MIS and from the social security contributions databases (managed by the Ministry team) which permits monitoring o f the employment experience o f each registered employed worker (SIJP- SistemaIntegrado de Jubilaciones y Pensiones). 9. Management o f Beneficiary Registry. MTESS maintains the registry o f beneficiaries o f Seguro. Information i s consolidated from data collected by municipal Employment Offices. A newly designed system, called "Emplear collects information " about individuals seeking a job placement and/or employed workers seeking career advancements who receive training under publicly financed schemes. In addition, the Ministrymanagesthe beneficiary registry for the Heads ofHouseholdprogram. 10. With the aim of improving the quality o f the beneficiary registry and enforcing eligibility criteria, routine monthly cross-checks o f the registry are carried out centrally with key databases (formal private and public employees, pensioners, other social programs, tax lists, and health insurance beneficiaries) before payment i s authorized. Under the Project, these efforts will continue. 11. Payment o f Transfers. Monthly payments are to be paid directly to the accounts o f beneficiaries held at the Banco Nacidn. Less than 2 percent o f all Seguro beneficiaries are receiving their payment incash, through bank or mail branches as they live inisolated areas and have no access to ATMs (thus makingthem ineligible for Grants). In all other cases, MTESS transfers monthly payments to beneficiaries' accounts at Banco Nacidn. Supporting documentation (showing that beneficiaries' accounts have been credited) i s kept at the Banco Nacidn, and is subject to audit by the national audit agency (AGN), and a summary o f that information i s sent to the MTESS. It i s important to note that Banco Nacidn has no fiduciary role inthe program, other than beingthe holder o f the accounts. Component 11:Family Allowances 12. The project will be monitored with a series of indicators which track the overall development o f Family Allowances and its different components. SUAF, the direct 55 payment program o f Family Allowances i s fully managed by ANSES, while the compensatory scheme i s controlled by AFIP,the federal tax authority. 13. Data on Family Allowances beneficiaries are obtained by ANSES directly from beneficiaries and from their employers through their monthly social security reports ("declarucidn juradu") where they report to AFIP all salaries and social security contributions paid, by employee. A series o f ANSES offices are involved in formulating, validating, clearing, registering and paying the Family Allowances (Benefits, Control, Systems, Finance), through a monthly process that starts with updates of beneficiaries' databases and ends up with transfers to individual beneficiaries' bank accounts. The Benefits department in ANSES reviews every month the previous stock o f beneficiaries, and updates the lists based on new employer's reports and information received directly from beneficiaries. The Control direction reviews the resulting benefit list, correcting individual cases as necessary, in consultation with local offices o f ANSES across the country. It then transfers the information to the Finance department, which issues the transfer orders to banks. 14. ANSES will submit, every month, a copy of the resolution signed by the Finance Manager ordering the transfers, as evidence that payments were made. The amount transferred according to this document will be compared with the information generated by AFIP regarding total payments made through the compensatory system, which is collected from the employers' social security reports and published in a report called "Informe Gerencial", which will be submitted to the Bank every month. Based on these two figures, the Bank will verify the variations in percentage o f family allowances paid through SUAF. 15. The above described process is carried out every month. A file is created which contains the necessary documentation to endorse the recording and payment o f the benefitspaid. 56 $2 5 l i m W B E s5 25 x x Zx8 B8 x E E 0 0 g 0 0 - m m 0 0 0 - m 0 If 0 0 m s N Annex 4: Detailed Project Description ARGENTINA: Basic Protection Project 1. The proposed Project is a Specific Investment Loan, supporting the social protection sector programs in Argentina. The operation will focus on two themes: (i) enhancing the effectiveness o f social protection programs; and (ii) creating conditions to expand their coverage. To achieve results on the first theme the operation will support improvements in design and operation o f two key social protection programs, which are directed to families with children and the unemployed. By promoting more transparent and efficient registration and payment processes, and introducing incentives to increase the effectiveness of training andjob placement services, the supported programs' should result inbetter social outcomes. The second theme o f expanding coverage recognizes that access to social protection programs in Argentina is limited and that investments can be made to prepare for expansion in coverage. In that context, the program will support reforms to the design and operation o f programs in order to create the conditions for an expansion of coverage inthe mediumterm. 2. The Project will include three components. First, the Project will support the Employment and Training Program ("Seguro"), a cash benefit, training and job placement program for unemployed and informal workers. The second component will support the Family Allowances program, focusing on the "direct payment" scheme that provides transfers for children o f formal workers inthe private sector, paid directly by the social security administration. Finally, a technical assistance component will offer support to strengthen Ministry o f Labor teams, and improve monitoring and evaluation o f social protection by designing and collecting a national Social Protection Survey. COMPONENTI:EMPLOYMENT TRAINING AND INSURANCE PROGRAM(ESTIMATED AMOUNT US$80MILLION) 3. This component will support the operation and scaling up o f Seguro during 2009. Seguro is a program aimed at unemployed workers, providing a monthly income transfer, training, andjob placement services. Access i s currently limited to current beneficiaries o f Jefes, although authorities have indicated that it could be open to other groups if necessary. 4. The non-contributory Seguro de Cupucitucibn y Empleo program (Employment Benefit and Training) was introduced by the Government on March 29, 2006 (Decree 336/06) as part o f its transition strategy from Jefes. The program aims to increase employment opportunities for unemployed workers. Since the start Seguro has been only available to current Jefes Program beneficiaries who voluntarily opt to switch to the new program. Seguro includes a higher monthly stipend (AR$225) than Jefes (which continued to be AR$l50), and accrual o f benefits in the pension system, but i s time- bound (2 years) and requires the signing o f an individual agreement stipulating specific conditions under which the stipend could be maintained. Seguro began in April 2006 in about 10 municipalities and has been gradually expanded. It combines a cash benefit with active labor market support, through a combination o fjob-search assistance and training. 58 5. The component will finance income transfers through Grants to eligible participants of Seguro, including (i)the basic transfer (AR$225 per month); (ii)per- diems paid to eligible participants participating in Seguro activities (AR$50 per month); and (iii) incentives linked to participation in the program's a~tivities~~. component The will not finance the employment andtraining services provided by the Seguro program. 6. Participants qualify to receive Seguro transfers by complying with eligibility requirements, as follows: a. Unless proposedby the Borrower and agreed by the Bank, must have been a recipient of the Jefes Program benefits; b. Participants mustbe unemployed workers c. Participants cannot be beneficiaries of other income transfer programs, including Jefes and other national or subnational workfare, CCT, retirement,or non contributory schemes. d. Participants must register and sign an agreement to join the program at a Municipal Employment office incorporated to the Network of Employment Services of MTESS. Inthis agreementthey commit to: i.Accept job offers received through the Municipal Employment Office (MEO); .. 11. Participate in interviews and job placement workshops organized by the MEO; ... 111. Join training activities (both basic and professional) offered to themby the MEO; iv. Renounceto their participation inJefes program; e. Participants are excluded from the program if: i.Theyfindaformaljob; ii.Theyreceivedthebenefitfortwoyears, unless otherwise agreed by the Bank; iii.Theyrejectjobofferswithoutjustification; and iv. They fail to comply with the conditions set inthe agreement f. With respect to Seguro Grants for Seguro Beneficiaries residing in a Province or Participating Municipality for which the IPPF applies, the Seguro Grants shall not be deemed eligible unless: (a) the IPP Agreement has been signed with the IPPF Entity or Entities, as the case may be, (b) andthe IPP has beenapproved by the Bank. 7. The Ministry of Labor, Employment and Social Security (MTESS) is the agency responsible for managing Seguro through bilateral agreements with provinces, the City of *'The incentives program is an innovationthat has been designed by the MTESS staff and is ready to be implemented, once it receives formal approval. The Project would finance them, after a review of regulations confirms that their designis satisfactory to the Bank. 59 Buenos Aires, and municipalities. The municipalities have the key role for the implementation. Seguro is implemented by the Ministry of Labor through local employment offices which are responsible for organizing employment services, and linking participants to basic education, and training courses, while income transfers are managed centrally. Participating local governments are required to have strategies for coordinating local development, employment and professional training policies. 8. Potential beneficiaries of Seguro apply for the program through municipal Employment Offices (EO) that are part of the Network of Employment Services promoted and supported by MTESS.At this time, only those receiving benefits from the Jefes program can apply. Following an interview to collect background informationabout past employment, education and training, applicants sign a contract establishing their rights and obligations under the program (regular contact with municipal employment offices; mandatory job search; participation in training, education courses, labor orientation; obligation to accept qualified job offers, etc.). Job history information, as well as records of participants' activities are registered in an electronic Management InformationSystem (MIS) at MTESS. 9. Participation in the program is limited to two years. Cash benefits are AR$225 during the first 18 months and AR$200 during the last 6 months. Inaddition, participants receive job search support through municipal employment offices and the network of employment services, including: labor intermediation services for public and private sector employment, basic and professional training, participation in training course, and technical assistance for starting small businesses. In addition to the monthly payment to Participants, the Seguro provides a per diem transfer, to finance inputs and transportation expenses in order to facilitate participation in education and training activities, as well as other small out of pocket expenses. Thus, participants enrolled in training or education activities may receive up to AR$50 more per month, for a maximum of 6 to 8 months. A parallel, much smaller program promotes hiring Seguro participants by public sector offices. In those cases, beneficiaries receive an additional monthly transfer of up to AR$600 that i s part of their salary (thus, this i s a temporary employment subsidy to public agencies). 10. The MTESS plans to continue expanding coverage of Seguro among Jefes beneficiaries, by transferring approximately 6,000 beneficiaries per month (until now the transfers to Seguro have averaged only 2,500 beneficiaries monthly), or 70,000 per year. Considering that participants will continue to complete their 2-year term or leave the program before that, this estimate implies that the total number of beneficiaries should reach 110,000 by the end of 2009; and 140,000 by the end of 2010. 11, The number of Employment Offices is also expected to grow. As of the end of 2008, there where 260 municipal employment offices in the network of employment services, but only 181 of those provide access to Seguro. In order to avoid bottlenecks in the provision of services, Ministry authorities plan to expand gradually this number, to reach 250 by the end of 2009, 300 by 2010 and 350 by 2011. Increasing the number of offices will allow more participants to be incorporated inthe program. 12. The Ministry plans to expand the number of participants to includenot only more of the current target population of Jefes beneficiaries, but eventually, other unemployed 60 individuals who do not receive Jefes benefits. The Ministry is also considering an increase in the cash benefit amount o f the program improving income transfers, through an incentive scheme: 13, Authorities are planning to offer additional benefits to participants who complete their education, complete on-the-job trainings, and increase benefits for some specific groups o f older workers. These changes would include: i. AmonthlysupplementofAR$75forparticipationinaprogramforcompletionof basic education. This supplemental monthly payment exists at the moment inthe program; the modification implies the increase o f the amount (from the existing AR$50) and an extension o f the receptionperiod to 10 months; ii.Atemporary supplementofAR$150forcompletingbasiceducation(receiptofa certificate; iii.AnincreasedmonthlybenefitofAR$125foronthejobtrainingactivities; iv. An increase in spaces in the labor market insertion program for adults over 45 years old and women. Component11: Family Allowances (Estimated amount US$365 million). 14. This component will finance payments made to qualifying workers for child benefits, paid through SUAF (the direct payment system o f Family Allowances managed by ANSES) directly to their bank accounts. 15. The component will finance benefits (income transfers) to participants complying with eligibility requirements, as follows: a. Beneficiaries must be workers formally employed as salaried by a private firmregistered inSUAF; b. Beneficiaries' family information, including date of birth and tax number identificationfor all children, is registeredinANSES' data system; C. Beneficiaries must have children younger than 18 years old, living in Argentina and single, under their care, including natural, adopted, and foster children; and d. Beneficiaries gross monthly salary must be up to AR$4,800. e. Benefits must be paid through SUAF directly to the beneficiary bank account. 16. Beneficiaries declared gross monthly salary must be below AR$4,800. If salary i s between A R $ l00 and AR$2,400, benefits are AR$135 per child per month. For salaries between AR$2,400 and AR$3,600, benefits are AR$l02 per child per month. For salaries between AR$2,600 and AR$4,800, benefits are AR$68. Also, benefits are increased for beneficiaries living inless advantaged regions: 61 mmmFl Salary Range IBasevalue 11Region1 11Region 11Region3 IRegion 2 4 AR$2,400.- Salary between AR$IOO and AR$291 Salary between AR$2,400 and AR$3,600.- AR$270 AR$4,800.- Salary between AR$3,600 and ~ 1 ~ 1 AR$270 Mendoza, Saltaand Formosa Region 2 includesthe province of Chubut Region 3 includessome Departmentsin Catamarca, Jujuy, and Salta Region 4 includesthe provincesof Santa Cruz and Tierra del Fuego 17. The SUAF expansion strategy will be implementedby requiring newly registered employers to join SUAF, and progressively switching existing employers to the new scheme. ANSES plans to complete the switching process by 2010, when the compensatory scheme would be closed or limitedto exceptional cases. 18.. The loani s expected to finance the equivalent of 790,000 benefits per month, at a per capita value of AR$135, for atotal of AR$107 million /month or AR$1,280 million a year, equivalent to US$365 million. This amount represents approximately 14 percent of total spending on family allowances (including SUAF and compensations, but not civil servants), 24 percent of payments through SUAF and 31 percent of payments of child benefits by SUAF, respectively. 19. This component will support the Government to advance its goal to increase children's human capital and protect them from social risks. As discussed in the economic analysis section, the Family Allowances program has a clear impact on poverty and social outcomes in Argentina. By supporting the authorities' efforts to increase the program's governance and generating conditions for further expansions, the component contributes to the Government's goals. COMPONENT 111:TECHNICAL ASSISTANCEFORTHE SOCIAL PROTECTION SYSTEM (ESTIMATED AMOUNT us$5MILLION). 20. The Technical Assistance component will support capacity building within the MTESS, particularly in the area of monitoring and evaluation of social protection policies. While the Ministry has strengthenedits institutional capacity inrecent years as a result of the experience of implementing some of the most important social policies in Argentina, there is a remaining challenge to improve its capability in the area of policy monitoring and evaluation. To improve this area, about one percent of the loan proceeds would be used to support the Ministry's team in the collection and analysis of detailed micro data to build a stronger monitoring system. This system will allow authorities to better assess the effectiveness of current social protection policies and promote reforms when necessary. 21. The component will include four activities: (i)Design and application of the National Social Protection Survey; (ii)Improvements of the monitoring system for Seguro; (iii) Preparation of studies to assess and improve coordination between MTESS 62 and Provincial and Municipal governments in the implementation o f Seguro; and (iv) Dissemination o f information o f the objective and results o f the Project. These activities will be carried out by the Undersecretary o f Labor Studies o f the MTESS, in collaboration with the Secretary o f Employment team. 22. The National Social ProtectionSurvey will focus on collecting and analyzing a set o f social indicators not available at this time. The survey will consider several areas, including: a. Labor market insertion o f householdmembers; b. Access to and impact o f social protection programs, with focus on income transfers; c. Access to and impact of social services, with focus on health and education; and d. Access to and impact o f other social programs, with focus on in-kind transfers. 23. Social Protection policies in Argentina have been developed and implemented in a context o f relatively weak monitoring environment, as macro indicators on social welfare, income distribution, poverty, and labor markets have been limited. While some useful social surveys have been collected inrecent years, the only two regular sources of information have been the National Population Censuses, collected once every ten years, and the Permanent Household Survey (EPH). 24. EPH was first collected in 1974, as part of a government effort to measure unemployment on a regular basis. From that year (when data was only collected for the Buenos Aires metropolitan area) until 2003, the survey was applied twice a year, in an expanding number o f large urban centers. By 2003, it covered approximately thirty urban centers, or 70 percent o f the urban population in Argentina. A major reform introduced that year converted EPH in a continuous survey, and data (including microdata) was publishedon a quarterly basis. The change also affected the design of the questionnaires, which became more detailed, although they still focused mostly on labor markets. 25. INDEC, the national statistical agency in charge o f EPH, also runs "special modules" with the main survey from time to time. For example, the Bank supported the implementation o f a module to assess information on the population participating on the Jefes program, and more recently supported the implementation o f a module to study the determinants o f labor informality in Buenos Aires. However, it has been clear for some time that EPH has two critical limitations to be used as a tool insocial protection policies monitoring and evaluation. First, its geographical coverage continues to be limited to part o f the urban population, thus excluding part o f the population that i s likely to be more vulnerable and less accessible by these programs. Second, the design o f its questionnaires and sampling framework has continued to be mostly focused on labor market topics. 26. In recent years, in a context of methodological controversies and political conflicts around INDEC, the EPH has become less accessible. Since the first quarter o f 2007 the microdata bases have not been published, strongly limiting their usefulness to study the impacts o f social protection programs. Thus, as an example, it i s not possible to know the social and economic characteristics o f the population that obtained a pension 63 benefit through a special program that expanded coverage o f the elderly to nearly 90 percent (infact, it i s not even possible to know more precisely what i s the coverage rate). 27. The Bank team i s currently designing, as part o f a AAA project, a small survey to be implemented in a mid-size province (San Juan) to collect data on social protection programs beyond the urban areas. This survey is being designed in collaboration with MTESS staff, as it is considered valuable not only for the new data that it will provide about San Juan, but also because it will serve as a pilot for some aspects that could be further explored ina National Social Protection survey. 28. In this context, the Government, through the MTESS plans to develop a new statistical tool to collect information on social protection policies. The goal i s to design, implement, and analyze a National Social Protection survey that will provide, with national coverage, detailed data on access, impacts and characteristics of the social protection programs and their beneficiaries. 29. In addition, the Project would support the preparation of several qualitative studies to improve knowledge about the dynamics o f Seguro at the local level, to improve the coordination betweenthe Ministry and local authorities. 64 Annex 5: ProjectCosts ARGENTINA: BasicProtectionProject Local Foreign Total Project Cost By Component and/or Activity US$ US$ US$ million million million Component 1: Employment Benefitand 135.00 135.00 Training Program Component 2: Family Allowances 1130.00 1130.00 Component 3: Technical Assistance for the 4.00 1.oo 5.OO Social Protection System Total Baseline Cost 1269.00 1.00 1270.00 Physical Contingencies Price Contingencies TotalProjectCosts' 1269.00 1.oo 1270.00 Interest during construction Front-end Fee TotalFinancingRequired 1269.00 1.oo 1270.00 'Identifiable taxes and duties are US$O, and the total project cost, net oftaxes, is US$1236 million. Therefore, the share of project cost net of taxes is 100percent. 65 Annex 6: Institutionaland ImplementationArrangements ARGENTINA: Basic ProtectionProject Framework 1. Project implementation arrangementsfall into three broad categories; related to (i) counterpart agency; (ii)agencies responsible for the implementation of project components; and (iii) implementation of project and program monitoring and evaluation functions. The latter arrangementsare describedindetail inAnnex 3, Project Implementation 2. Agencies, Roles and Responsibilities: The project will focus on two programs that are considered core to the social protection strategy: the Seguro (Employment and Training Insurance) program (Component 1) and the Family Allowances program (Component 2). By taking advantage of Argentina's institutional and fiduciary framework, the proposed project would build on the existing organizational and management structures of the Ministry of Labor, Employment and Social Security (MTESS) and the National Administration of Social Security (ANSES) which are currently responsible for managing and implementing Seguro and Family Allowances, respectively. The technical assistance component will also be the responsibility of the MTESS but through the Undersecretary of Labor Studies (Component 3). 3. The coordination between the National Government Agencies (MTESS and ANSES) and the World Bank will be the responsibility of the Ministry of Economy and Public Finance (MEPF), through the National Directorate of Projects with International Credit Organizations (DNPOIC). 4. The National Directorate of Projects with International Credit Organizations (DNPOIC) will be the Bank counterpart for the project. The DNPOIC will have overall responsibility for achieving Project goals through the coordination of activities with the specific Agencies responsible for the implementation of Project's components; MTESS, though the Secretary of Employment (Component 1) and the Undersecretary of Labor Studies (Component 3), ANSES (Component 2). 5. Provinces and municipalities have a role inthe implementation of Seguro, as they are responsible of managing the employment offices, provide different services to Seguro beneficiaries and design and implementIPPs when necessary.They coordinate their roles with MTESS through formal agreements. ProjectManagement 6. The Project will be carried out by the Borrower through MTESS (Components 1 and 3) and ANSES (Component 2), under the overall coordination and supervision of DNPOIC. The specific coordination activities of DNPOIC will include: (a) on-going planning and supervision of the project; (b) applying an Operational Manual and verifying that the operational procedures, as established inthe LoanAgreement and inthe Operational Manual, are being complied with; (c) consolidating project budgeting, action plans and disbursement plans (d) consolidating reports on financial performance and 66 disbursement; (e) tracking project funds and Treasury operations, making decisions regarding financial flows for project components, as well as the financial flows between the designated account and the National Treasury, the World Bank, and the operative account in the MTESS, (f) monitoring independent audit arrangements; (8) providing operational guidance to the units in charge of implementation of project activities; (h) supervising compliance with these guidelines; and (i)preparing progress reports on the project (including technical and operational activities, and compliance with operational guidelines) with inputs from the implementing Agencies, and submitting these to the World Bank every three months. The DNPOIC would be also responsible for monitoring the project's monitoring and evaluation arrangements (See Annex 3), consolidating procurement plans for the technical assistant component (Component 3) and providing technical assistance to the Agencies (MTESS and ANSES) to meet the provisions of the Project. 7. The Coordinator for the project (the Director of the DNPOIC) and his team will be responsible for establishing prior to negotiations and applying the operational directives and activities of the project, ensuring that they are consistent with the objectives of the project. The Borrower will allocate counterpart fwnds for the financing of the activities of the coordinating unit and for the implementation of the audit required by the Loan Agreement. The DNPOIC is currently in charge of programming loans with International Credit Organizations in accordance with National Government's priorities. The staff of the DNPOIC has wide experience in project supervision, monitoring and evaluation. Eventually, staffing of the DNPOIC may be completed with one or two positions in order to manage the current Project, and following the provisions and job profiles set on the Operational Manual. 8. The DNPOIC is not expected to develop technical expertise that already exists in the line departments of MTESS and ANSES. The project implementation arrangements would build on the experience of these national programs. Where there is a particular needto build implementation capacity, this would be done by strengthening existing line departments in MTESS and ANSES. The Operational Manual would include a description and TORSof the positions that needto be strengthened. 9. ANSES as well as MTESS are part of the National Public Administration, and thus their expenditures execution processes are included in the Integrated Financial Management System (SIDIF). SIDIF will monitor the budget execution of 100percent of payments of Seguro and Family Allowances expenditures to be financed from the proceeds of the loan. For this reason, there no needto sign any agreement with ANSES, for the execution of project funds. ImplementationStrategy 10. Implementation of Component 1. Component 1 will finance Grants to participants of Seguro, the Employment and Training Insurance Program, which was introduced by National Decree 336 in 2006 to assist the beneficiaries of the Heads of Household Program to re-enter the labor market. Seguro combines a cash benefit to poor families with active labor market support, through a combination ofjob search assistance andtraining, as describedinAnnex 1. 67 11. Under the current loan it is expected to finance income transfers to participants that were part of Jefes, paid by debit cards. The Bank's share o f income transfers will be approximately 60 percent o fthe total budget allocation to the Program. 12. Seguro is currently being implemented by the MTESS, which is responsible for managing the program through bilateral agreements with provinces, the City o f Buenos Aires, and municipalities. The MTESS maintains a management information system (MIS) which includes the beneficiary registry and trackedjob history information, as well as records o f participants' activities (information on individual compliance with the work or educatiodtraining requirement). 13. As described in Annex 3 the data for Project monitoring will be drawn from the MIS and from the database for social security contributions which permits a monitoring o f the employment histories o f each registeredemployed worker (SIJP-SistemaIntegrado de Jubilaciones y Pensiones) managed by Administracibn Federal de Ingresos Pziblicos (AFIP). The MTESS will consolidate the data into reports in coordination with the DNPOIC. 14. The MTESS makes arrangements for monthly payments to beneficiaries directly to the bank accounts o f the beneficiaries associated with their debit cards. The supporting documentation (showing that the beneficiaries' accounts have beencredited) i s kept at the bank and subject to audit by the Auditoria General de la Nacibn (AGN). 15. MTESS checks internal consistency withinthe beneficiary registry and as a result, drops beneficiaries and corrects situations. Before a payment is authorized, routine monthly cross-checks o f the registry are carried out centrally with key databases as SIJP (formal private and public employees, pensioners, other social programs, tax lists, and health insurance beneficiaries). Under the proposedProject, these efforts would continue. 16. Disbursementrequests for Component 1would be made as discussed inAnnex 7. 17. As mentioned above, the Seguro program has ongoing audit arrangements which are executed by the AGN. For a description o f the audit arrangements see Annex 7. 18. Implementation of Component 2. Component 2 will finance Grants to beneficiaries o f child allowances receiving their payments directly into their bank accounts through SUAF. The "Sistema Unico de Asignaciones Familiares" - SUAF or a "direct payment" scheme o f Family Allowances, a program that, among other benefits, provides a monthly payment for children o f low income salaried workers. The program created by Res. ANSES 641/03 allows ANSES to make monthly payments directly to beneficiaries, instead o f using deductions from contributions by firms. In the case o f SUAF, employers make the full contribution to the ANSES, and then ANSES pays the benefits to workers directly, as described inAnnex 1. 19. SUAF i s currently implementing by ANSES, which is in charge o f managing and paying these benefits. The implementation arrangements o f this component would build on the experience o f this agency. ANSES relies on written procedures and resolutions (Resolution 300/2008) that describe the process o f formulation, validation, registration, approval and payment o f the monthly benefits. Each monthly payment comprises an internal file ("Expediente") which i s registered in the SUAF system, managed by ANSES. This Expediente contains all the necessary back up information to proceed to the 68 registration and payment o f the benefit. Each payment i s made under an Approval Resolution signed by the Finance Manager o f the ANSES. Within ANSES each area has an specific responsibility an the Expediente go through the Benefits Area (Gerencia de Prestaciones), to the Control Area (Gerencia de Control), the Systems Area (Gerencia de Sistemas y Telecomunicaciones) and the Regulations Area (Gerencia de Normatizacidn de Prestacionesy Servicios). 20. The Grants will be paid following the existing payment process which runs monthly and starts with consolidation o f web-based monthly employers' social security reports (DDJJ) into the SUAF system. ANSES maintains an MIS which includes a large national database o f people related to the social security system and their family relationships (Base de Datos de Personas- ADP), that tracks information on personal identification and benefits. The consolidation o f the DDJJ in the system i s followed by checking internal consistency within the SUAF and ADP databases. Before payments are authorized (including the Grants), routine monthly cross-checks o f the SUAF database are carried out centrally with the SIJP database to detect over coverage (pluri-cobertura and pluri-empleo). The last step o f the procedure is signing the payment approval resolution which authorized to transfer the money through the bankingsystem. 21. In most cases, the SUAF is implementedin firms where workers are receiving their salaries through a bank account, so that ANSES can transfer the allowances to the worker's bank account. As mentioned above, the supporting documentation (showing that the workers' accounts have been credited) is kept inthe Expedienteand its corresponding electronic records, once the banks have sent the supporting documentation back to the Argentine Central Bank (BCRA) and ANSES. The whole procedure is subject to audit by the Auditoria General de la Nacidn (AGN). 22. Disbursement requests for Component 2 will be made as discussed inAnnex 7. 23. Implementation of Technical Component. Component 3 will support capacity building within the MTESS, particularly in the area of monitoring and evaluation of social protectionpolicies. 24. The Undersecretary o f Labor Studies o f the MTESS will be responsible for implementing this component, ensuring that the content of the activities to be implementedis consistent with the objectives described inAnnex 4. This technical team will be responsible for: (a) overseeing technical design and implementation; (b) planning and monitoring the technical project component; (c) preparing technical specifications and terms of reference for contracting consultant services; (d) administration o f component activities, including agreements, contracts, procurement and the Procurement Plan, (e) the procurement actions, and (0preparing reports on financial performance and disbursement, 25. The Undersecretary o f Labor Studies has technical and analytical capacity to manage this kind o f projects. On the procurement side, this would be supported by the Coordination o f Special Programs and Projects (CPyPE) below the Undersecretary, with the collaboration o f the Central Executing Unit (UEC) o f Employment Secretary, who will assist them inthe procurement o f goods. 69 26. The CPyPE would be in charge of the financial planning, procurement and administration for the component activities. The DNPOIC would support and coordinate with the Undersecretary the planning, documentation and reports needed to be presented to the World Bank. 27. DNPOIC would be responsible of funding component activities, according an agreed action plan. As discussed in Annex 7, funds will be deposited in the Designated Account managed by DNPOIC and payments for eligible expenditures incurred will be made from an operative bank account inlocal currency under control of the MTESS. 28. In addition, Annex 7 and Annex 8 outline the arrangements according the procurement guidelines andthe financial managementarrangementsfor this component. ProceduresandRelationships 29. Operational Manual (OM): The processes and procedures governing project implementation would be outlined in detail in the Project's Operational Manual (OM). The DNPOIC will prepare prior to negotiations and make applicable thereafter a draft of an O M of the project, which would define roles, responsibilities, mechanisms, schedules and accountability arrangements, necessary for implementation of the project such as: institutional arrangements; operational procedures, eligibility criteria of Grants and Beneficiaries, procurement and contracting procedures for Component 3,sample standard bidding documents and filing instructions (including for QCBS); disbursement and financial management procedures, including template FMRs; auditing procedures; and supervision, project administration, monitoring and progress reports of the Project, and evaluation plans; and Performance and Disbursement Indicators. The O M will also includeproceduresfor carrying out Component 1 and 2, including financial reporting and disbursementprocedures. 30. Procedures governing the basic relationship between the Government and the World Bank, mainly covering financial management and procurement are detailed in Annexes 7 and Annex 8 respectively. 70 Annex 7: FinancialManagementand DisbursementArrangements ARGENTINA: Basic ProtectionProject 1. This annex contains the results of the assessment of the proposed financial management arrangements for the Argentina Basic Protection Project. These arrangements include the budgeting, accounting, internal control, funds flow, financial reporting, and auditing arrangements of the entities responsible for implementing project. 2. The assessment was performed in line with OP.BP10.02 and guidelines issued by the Financial Management Sector Board (FMSB) onNovember 3,2005. Its objective was to determine whether the F M arrangements are acceptable to the Bank in the extent that they: (i)ensure that project funds are used only for the intendedpurposes in an efficient and economical way; (ii)enable the accurate recording of all transactions and balances relating to the project; (iii)facilitate the preparation of regular, timely and reliable financial statements; including Interim Financial Reports (IFR); (iv) safeguard the program's assets; and (v) includeauditing arrangementsacceptableto the Bank. 3. The overall conclusion of the assessment is that the project's implementing agencies, MTESS and ANSES under the coordination of the DNPOIC, have adequate arrangements in place that meet the Bank's minimum requirements. In addition to the National Integrated Financial Management System (SIDIF), both the implementing agencies have existing financial management systems that can be relied upon to ensure that the project's funds are used for their intended purposes. COUNTRY ISSUES 4. A Country Financial Accountability Assessment (CFAA) that was conducted jointly by the Bank and the IDB in 2006/2007 and whose final Report28was published in March 2008 provides a diagnostic of Argentina's public financial management (PFM) systems and practices. Its main findings are that the PFM systems are well designed and underpinned by a strong legal framework and the availability of human resources with sufficient technical skills. These systems enable control of the budgetary resources received by the Government from all sources. Furthermore, they provide sufficient informationto determine whether funds are used inaccordance with their objectives. The report further indicates that the introduction of the National Integrated Financial Management System (SIDIF) and the associated expenditure execution systems adopted in the decade preceding the financial crisis of 2001-2002 represented a significant accomplishment for the public administration. Each spending unit manages its expenditure process within the control framework established by the Financial Management Law (LAF) and SIDIF. 5. However, despite these achievements, the CFAA concludes that the country's PFM performance is still operating below expectations. Limitations in the legislative oversight of the budget execution, the tendency to adopt exceptional rules instead of already established standards and the lack of a risk-oriented external audit approach are Argentina Country FinancialAccountabilityAssessment; ReportNo. 39228-AR. 71 some o f the factors affecting PFM performance. With regard to the social security sector in which the proposed project will be implemented, the CFAA indicates that the PFM risk can be considered moderate at the National Public Administration (NPA) and social security institutions that are included inthe SIDIF. 6. Following from the CFAA, the Argentina CAS included a Fiduciary Action Plan (FAP) to help strengthen the operating environment and to ensure effective management o f the fiduciary risks for Bank projects in Argentina. The FAP basically consists o f three components: increasing public access to information on bank projects, bolstering Bank fiduciary monitoring and enhancing transparency and competition inpublic procurement. The financial management aspects o f the FMthe Plan aim at: i)improving timeliness of external audit compliance for Bank-financed operations; ii)increasing strategic focus and coverage o f supervision tools assessing fiduciary risk in operations; and iii) complementary actions such as support streamlining and harmonization o f fiduciary processes and reliance on country systems when these meet adequate fiduciary standards. 7. The financial management arrangements for the project aim to contribute to the achievement o f the objectives o f the FAP. These include the reliance on the use o f existing country systems. Furthermore, during the implementation o f the project, the Bank will conduct regular supervision o f the financial management aspects o f project implementation to ensure the continuing adequacy o f the financial management arrangements, to evaluate project internal controls and to update the risk assessment. INSTITUTIONALARRANGEMENTSFOR FINANCIALMANAGEMENT 8. A detailed description o f the project and of its objectives and overall implementation arrangements are included in Annexes 4 and 6. In summary, the project aims to support the Government's social protection program and will finance Grants to eligible beneficiaries o f two programs that are considered core to the social protection strategy: the Seguro (Employment and Training Insurance) program (Component 1) and the FamilyAllowances program (Component 2). Inaddition, its third component aims to provide technical assistance for the purposes improving the monitoring, evaluation and dissemination o f information about social protection policies. Specific responsibility for the implementation o f the projects will be shared between two agencies. Ministry of Labor, Employment and Social Security (MTESS) will be responsible for the implementation o f component 1 in respect o f the Seguro (Employment and Training Insurance). The National Administration o f Social Security (ANSES) will be responsible for implementing the Family Allowances component. MTESS will also have the responsibility o f implementing the technical assistance component 3 through the Undersecretary o f Labor Studies. Both ANSES and MTESS have substantial experience inimplementingprojects supported by the Bank. 9. The overall coordination o f the project will be the responsibility of the National Directorate o f Projects with International Credit Organizations (DNPOIC), an agency o f the Ministry o f Economy and Public Finance (MEPF). As part o f its coordination role, it will be responsible for executing the FM responsibilities of the project, including maintaining the accounting records, preparing financial reports, managing the flow o f 72 funds from the Bank to the bank account to be used for the project, and ensuring that audit arrangements are properly carried out. RISKASSESSMENT AND MITIGATION 10. Financial Management risk i s assessedin order to ensure that, to enable the Bank to make decisions on the appropriate level o f assessment and supervision intensity and to enable FMresources to be allocated in a manner consistent with assessedrisks. 11. The risk assessment process aims to identify factors that may prevent the achievement o f the objectives o f the project and actions that may be taken to mitigate these risks. With respect to the financial management arrangements, the objectives are: to ensure that funds are used only for their intendedpurposes in an efficient and economical way; to ensure that funds are properly managed and flow smoothly, adequately, regularly and predictably to implementingagencies and to beneficiaries; to enable the preparation o f accurate and timely financial reports; to enable project management to monitor the efficient implementation o f the project; and to help safeguard the project assets and resources. The risk assessment process thus identified the key factors that may compromise the achievement of these objectives. 12. The table below identifies the key risks that may compromise the achievement o f these objectives and appropriate risk mitigating measures that have been incorporated into project design management should address these risks. FM risk at entry was considered Substantial mainly due to the special features o f a project o f this type involving a large number o f beneficiaries that are distributed across the entire country and thus implyinga huge number of monthly payments. A number o f controls have been designedinto the project in order to address this risk. These include the preparationof an internal audit plan and the proposed conduct o f a concurrent audit to assess the consistency and veracity o f the beneficiaries' database. These and other mitigation measuresthat address the identified risksreduce the overall residual risk to Moderate. 73 Table A7.1. RiskAssessment and Mitigation Measures Risk ResidualRisk Risk MitigatingMeasures Condition Rating(*) Inherent Risk Country Level Moderate The moderate risk reflects stronglegal No and institutional framework for PFM while acknowledgingsome perceived weaknesses that are addressed in ongoing government reform programs Entity Moderate Implementingentitiescontinueto No benefit from efforts supportedby the Bank to strengthentheir systems Substantial - A concurrent audit will examinethe No eligibility of beneficiarypayments. This features - Internaloversight will regularly be number of transactions and exercisedto ensure that beneficiaries spread over a wide eo ra hicalarea ControlRisk Budgeting Moderate -National rules will be used for Accounting Moderate IIbudgeting, and allocationswill be - - reflectedin the SIDIFSystem - The UEPEX system, linked to the No SIDIF, will be usedto recordall InternalControl No system, and controlsover paymentsto beneficiarieshave been strengthened in Funds Flow Substantial IIthe recent past Expanded scope of audit on beneficiarydatabase- - Bank debit cards will be No predominantly used for paymentsto Large number and wide beneficiaries. Family allowanceswill be geographicaldistribution of paiddirectly by the implementing beneficiaries agency. Payment processeswill be the subject of internal inspectionsand external audit. FinancialReporting Moderate - Existing information systemswill be No used to generate financial reportson a regular basis. Auditing Moderate In addition to the normal audit carried Legal out by the AGN, a concurrentaudit will clause Special features of the specificallyexamine the controlsand operation may affect the procedures used for making payments. issuance of timely audit opinion. Overall ResidualRisk rating Moderate PROGRAMSTRENGTHSAND WEAKNESSES 13. Strengths: Both implementing agencies have substantial experience in implementing World Bank supported projects and their existing internal control 74 framework will be usedfor the project. The internal control processes are strong and well documented. Their implementation is facilitated by the use o f recently upgraded information systems that use rationalized databases. The institutions o f internal and external oversight operate to a satisfactory degree and the scope o f external audit i s widened includes a concurrent audit that will examine specific issues related to payment procedures and eligibility. 14. Weaknesses: These are indicated in the section describing the results o f the risk assessment. In particular, the wide geographical spread o f beneficiaries presents a potential risk o f leakages in the funds flow mechanism. However, appropriate mitigating actions have beenproposed to address the key risks. BUDGETING 15. National budget formulation is guided by rules established by the National Constitution and the Financial Administration law. The preparation o f the budget, which integrates current and capital expenditures, i s coordinated by the Ministry o f Finance (MEF) and follows a clearly defined calendar that is generally adhered to. Family allowances and pension payments are included in the annual budget o f the MTESS and ANSES. ACCOUNTINGPOLICIESAND SYSTEM 16. The government's accounting standards are comprehensive and consistent with international accounting standards. Accounting policies specify the accounting treatment o f financial transactions and establish basic principles designed to ensure that accounting records are complete, relevant, and reliable, and that accounting practices are followed consistently. The General Accounting Office ensures that accounting policies adopted throughout the public sector offer adequate guidance to public officials in the discharge o f their duties. Accounting regulations and guidelines indicate specific procedures to be used for each significant accounting function and for the maintenance o f accounting records. 17. Project transactions will be recorded on a cash basis using a chart o f accounts that reflects disbursement categories, program components and sources o f financing. 18. The Government of Argentina uses a financial management information system known as UEPEX for foreign funded projects. This system i s linked to the government's including the Integrated Financial Management System (SIDIF - Sistema Integrado de Informacibn Financiera). It will be used to track, record, analyze, and summarize the financial transactions relating to the project. The financial statements will be prepared on a cash basis in accordance with International Accounting Standards. The system will be used to generate interim, annual, and other financial reports. The use o f a computerized accounting system reduces the risk of human errors that would otherwise occur in record keeping, and ensures the availability o f financial information and reports in a timely manner. As a result, the conclusion o f the FM Assessment i s that the accounting system i s adequate for accounting and reporting needs. 75 19. The project's financial and accounting transactions will be managed usingalready existing institutional and financial management systems. The Bank currently provides support to the Government to develop a new web-based version o f SIDIF. FINANCIAL REPORTING 20. The UEPEX system will be used by the DNPOIC to generate the requisite annual financial statements and quarterly InterimFinancial Reports (IFRs). These reports will be used by DNPOIC management for monitoring the financial aspects o f the project. The Bank will rely on these reports to meet its information needs. The reports are generated usingthe budget execution information inthe SIDIF systemandconsolidate the results of all the project components. The format o f the quarterly IFRs will be agreed with the Borrower and will be documented in the minutes o f negotiation for the project. In order to satisfy the Bank's requirements, the reports will include information on sources and uses o f funds by disbursement category, uses o f funds by activity/component. This information will be indicated for each quarter and also cumulatively for the year, and will indicate variances between budgeted and actual information. Inaddition, the reports will include non-financial information on the project implementation progress. INTERNALCONTROLSAND INTERNALAUDIT 21. The internal control environment to be used for the project is anchored in Argentina's legal and institutional framework. This allows for the establishment o f roles and responsibilities for financial management, and the proper segregation of duties. The internal controls relevant to the project include arrangements to provide reasonable assurance that: (i)operations are conducted effectively, efficiently, and in accordance with relevant financing agreements; (ii)financial and operational reporting is reliable; (iii)applicable lawsandregulations arecompliedwith; and(iv)assetsandrecordsare safeguarded. The use o f the national SIDIF system, with its inbuilt controls that ensure proper authorization o f transactions, contributes to the observance o f these controls. 22. Inrecent years, the Government has undertaken reforms to strengthenthe controls on social protection payments. These controls will be used for each o f the project's components. 23. The Seguro Grants seeks to support government efforts to continue the Government's ongoing Heads o f Household Transition Project (Loan 7369-AR) as well as the previous Social Protection VI - Heads o f Household Project (Loan 7157-AR). These operations facilitated the move towards making payment o f benefits from a cash basis to the use of debit cards for individuals. This had the effect o f increasing transparency in these payments and helps to enhance the eligibility and accuracy o f the payments made. 24. With respect to the Family Allowances program, the Bank has also supported the in-depthtransformation of the National Social Security Administration (ANSES) with a Technical Assistance Project (Loan 4131-AR). This operation successfully supported the implementation o f significant institutional reforms which have enhanced the agency's management capacity, coverage and service delivery. It specifically allowed ANSES to adopt controls to reduce fraud and enhance transparency in the granting o f benefits. A 76 new technological platform underlying the information systems has been built that enables better data security, the rationalization o f databases and the use o f better ICT equipment. 25. ANSES has also adopted a new system o f making payments, known as the Unified Family-Allowance Payment System (Sistema Unico de Asignaciones Familiares, SUAF). This enables ANSES to make some of its paymentsdirectly to beneficiaries. 26. Other payments are made by employers who then claimed compensation from ANSES. That method i s prone to double payments and the heightened risk o f fraud and abuse by employers. The new SUAF system enhances the eligibility o f these payments. 27. Underlying the SUAF is an internal policy issued by ANSES (known as Resolution No. 300 - R-300) that regulates the procedures for preparation, validation, approval, recording and transfer o f funds to the banks. It details mandatory responsibilities o f the Finance, Benefits, Information and Telecommunications, and the Control departments. Every month the process is recorded in a file (Expediente) that indicates all o f the actions taken by the line departments o f ANSES involved in the process. R-300 provides a good internal control framework including ex-ante controls over the databases, adequate segregation o f duties among the different departments and sample control o f the beneficiarieshenefits database on a random basis. Following a review o f the file for September 2008 file, the FM assessment confirmed that the provisions o f the resolution are fully complied with. 28. In Argentina, the General Syndicate of the Nation (SIGEN) is responsible for carrying out the internal audit function o f public sector agencies, including the MTESS and ANSES. This institution i s part o f the Federal Government, and its chief executive i s appointed by and reports to the President. SIGEN supervises and coordinates the actions o f the Internal Audit Units (IAU) in all agencies, approves their audit plans, conducts research and independent audits, systematizes the information from its own reports and those produced by the IAU. 29. As part o f the FM assessment, a review o f the 2009 audit plan as approved by SIGEN for the IAUwithin ANSES was carried out. The plan details: i)specific activities relating to the audit o f the process for family allowance payments through the SUAF; ii) analysis o f the implementation o f internal control policies relating to information technology (IT); and iii)review of follow-up by ANSES in response to observations made by external auditors. The IAUwill prepare reports on their reviews. The Bank will review these as part o f their supervision. FLOWOFFUNDS DISBURSEMENT AND ARRANGEMENTS 30. The National Administration of Social Security (ANSES) is part of the National Public Administration (NPA), and thus its expenditure's execution process i s included in SIDIF but legally (Article 38 of Law 24447) excluded from the Single Treasury Account (CUT). The CFAA states that cash management for the two special accounts that manage the social security contributions collection and the recording o f payments o f pensions and social benefits (98.5 percent of total ANSES expenditures) i s made in close coordination with the National Treasury. 77 Arrangements for Components 1and 2: 3 1. The Bank would disburse on the basis o f advances through a Designated Account (DA). Loan proceeds withdrawn from the Loan account will flow to a DA indollars to be opened inBanco de la Nacidn Argentina (BNA) under control o f the DNPOIC. Based on program implementation and payments o f eligible expenditures made by ANSES and MTESS, DNPOIC will reimburse the Government from the advance to the DA to the Single Treasury Account (CUT) managed by the National Treasury Office (TGN). By submitting a withdrawal application to the Bank the Borrower will state that loan proceeds are used to finance eligible expenditures. Advances would be made on the basis o f a three-month forecast o f project eligible expenditures supported by Interim Financial Reports(IFR). Disbursement indicators 32. As per provisions of Section B.2 of the PAD, the Bank would make advances up to US$180 million if disbursement indicators shown in the table below have been satisfactory met. Disbursement Indicators 7 Baseline Values Second Set a. Average of the monthlypercentageof beneficiariesof the SCE Program receivingEmploymentand Training Services ofthe total number of beneficiariesofthe SCE Program, duringthe 6 monthperiodpreceding 23.5% 24% 26% the date in which the Disbursement Indicatoris measured. b. Number of beneficiariesregisteredinthe SCE Program 100,000 c. Number of EmploymentOfficesauthorizedfor delivery of Employment I and Training Services throughagreements signed betweenthe Borrower, throughthe Ministry of Labor, and the respective 230 Municipality or Province. 18* 2oo d. Average of the monthlypercentageof paymentsmadethrough SUAF of the total payments made under the AF Programto salaried workers in 1 the private sector duringthe 12 monthperiodprecedingthe date in 58.7% 62.8% 67.4% which the Disbursement Indicatoris measured. 33. In addition, retroactive financing will be requested for payments of eligible expenditures made by the Borrower not more than one year before the expected date of signing o f the Loan Agreement; for an amount up to 20 percent o f the loan amount. 34. Component 1 i s expected to finance monthly income transfers to beneficiaries o f a non-contributory benefit program for unemployed workers that were part o f the previous Heads o f Household Project. The Bank's share o f income transfers will be approximately 70 percent o f the total budget allocation to the Program. During the implementation of the previous project a significant effort has been made to increase transparency, as a result the payments system to beneficiaries has moved from payments in cash to the use o f individual debit cards. 78 35. Component 2 would finance a portion of the Family Allowances Program monthly paid by ANSES through the Unified Family-Allowances Payment System (Sistema Unico de Asignaciones Familiares, SUAF. The Bank loan will only finance the share of FA that are paid directly to beneficiaries' bank accounts. Child Family Allowances payments under the SUAF system amount to US$1.13 million per year approximately. It is envisioned that the Bank finds will cover 35 percent of these Child Family Allowance payments. 36. All consolidated IFR documentation would be maintained by MTESS and ANSES for post-review and audit purposes for up to one year after the final withdrawal from the Loan account. 37. Arrangements for Component 3. Funds will be deposited in the D A managed by DNPOIC. Payments for eligible expenditures incurred will be made from an operative bank account inlocalcurrency under control ofthe MTESS. Figure A7.1. Components 1and 2 Flow of Funds -' MEF's & Payroll taxes Account (AR$) Managed Account through National Budget System 1 account accounts (SIDIF) (SIDIF) D. Account US$ BNA DNPOI- MEF [ J Beneficiaries' of C1- bank J [ Beneficiaries' accounts of C2- SUAFbank naanirnts 38. New Policy Framework on Eligibility of Expenditures in World Bank Lending applies for this project since the country's financing parameters for Argentina have been approved. 39. The DNPOIC will request the access to the Bank's Client Connection webpage to perform the periodic reconciliation betweenits own registries and the Bank disbursement records. 40. Loan proceedswould be disbursedagainst the following expenditure categories: 79 Table A7.2. Disbursementsper ExpenditureCategory (2) SCE Grantsand AAFF Grants 173,875,000 100% (3) Goods, Non-ConsultantServices, 5,000,000 100% Consultants' Services and OperatingCosts for Part I11of the Project - (4) Front-endFee 1,125,000 (5) Premia for InterestRate Caps 0 and InterestRate Collars TOTAL AMOUNT 450,000,000 41. As long as all indicators for both programs are fulfilled, the Borrower may choose to present eligible expenditures for the SCE and/or the AAFF Grants programs using any combination o f expenditures from bothprograms. EXTERNAL AUDIT ARRANGEMENTS 42. The project's external audit arrangements are designed to meet the Bank's requirement for audited financial statements that reflect the project's activities and for the audit to be conducted inaccordance with auditing standards acceptable to the Bank. 43. The Argentine Supreme Audit Institution, Auditoria General de la Nacidn (AGN) i s constitutionally mandated to audit all government projects. The Bank i s satisfied that the AGN has sufficient independence, experience and competence to audit the project. The annual financial statements will be audited in accordance with Terms o f Reference (TOR) that meet the Bank's Guidelines. The audited financial statements together with the auditor's report and management letter covering identified internal control and accounting system weaknesses will be submittedto the Bank within six months after the end o f each financial year. 44. Beyond the normal financial audit, the TORS will require the conduct o f a concurrent audit o f the process o f migration o f beneficiaries from the HHT program to the Insurance Program, Seguro de Capacitacidn y Empleo including validation o f controls operating at local labor offices and consistency o f the beneficiary database. In the current project, some issues have been identified and reflected inthe audit report, but did not materially affect the financial statements and unqualified audit opinions were issued.*' 29Loan 7369-AR Unqualified opinions on financial statements, SOEs and Designated Accounts for 2006 and 2007. 80 45. The audit TOR will also comprise a review o f the beneficiary databases of the Family Allowances component in order to ensure that they are reliable enough to support program eligible expenditures. 46. The audit report will include opinions with respect to the financial statements, eligibility o f expenditures and Designated Account, compliance with provisions of the legal agreement and a management letter identifyingany internal control weaknesses and areas for improvement. SUPERVISION PLAN 47. The supervision plan and the resources to be allocated thereto have been determined in accordance with the risks identified. During project implementation, FM staff will assess the continuing adequacy of the financial management arrangements for the project. In addition to monitoring the timeliness o f receipt o f the interim and annual audited financial statements, FM staff will review these reports and any prepared by the internal audit unit as part o f their supervision duties. In addition to providing ad-hoc support as required, Bank FM staff plan to participate in at least one supervision mission every six months. 48. The supervision planmay be adjusted by the assigned FMS according to project's fiduciary performance and updated risk. PENDING STEPS 49. The following actions were identified as pending steps duringproject preparation, and were completed by Negotiations. Table A7.3. FinancialManagementAction Plan Action ResponsibleEntity CompletionDate I1. Finalize Administrative Section of Operational DNPOIC Completed Manual which will include inter alia: a) Chart o f accounts; b) TORSfor external audit c) IFR format agreed with the Bank; d) Format of the Annual Financial Statements e) Administrative procedures; 81 Annex 8: ProcurementArrangements ARGENTINA: BasicProtectionProject GENERAL 1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 - Revised October 2006; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 - Revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. 2. Procurement implementation: For Component 3 (Technical Assistance) the Undersecretary of Labor Studies of the MTESS through the Coordination o f Special Programs and Projects (CPyPE) will be responsible for the procurement actions, mainly for the selection and contracting o f consultancy services (individuals and firms) with the collaboration o f the Central Executing Unit (UEC) of Employment Secretary, who will assist them inthe procurement o f goods. 3. Procurementof Works:N o civil works are expected underthe Project. 4. Procurement of Goods: Goods procured under this project would include: computer and networking equipment, plotter and furniture. These goods will be procured usingnational competitive bidding (NCB) procedures for contracts estimated to cost less than US$500,000 equivalent, international competitive bidding (ICB) procedures for contracts above this threshold, and through shopping when the individual cost o f the items is less than US$lOO,OOO. The procurement will be done using the Bank's SBD for all ICB and National SBD agreed with or satisfactory to the Bank. 5. Procurementof non-consultingservices: All contracts for services not related to consultant services (organization o f seminars, workshops, printing services) may be procuredunder the same methodologies and thresholds specified for goods. 6. Selection of Consultants: Consultant services required under Component 3 are expected to include: i)Implementation o f survey tasks -other than design- including planning and logistic, development o f pilot experience, validation o f processes and tools, redefinition o f tools, training, field work, monitoring and design o f data system to carry out the National Household Survey; ii)qualitative studies and diagnostics; iii)re-design o f information system o f Employment Secretary. Consulting Services under this project would also include services to be provided by individuals, such as: (i) technical assistance for the design, analysis and results o f National Household Survey. All contracts will be procuredusing Bank's Guidelines for the hiringo f consultants. 7. For consultant firms, QCBS (Quality and Cost Based Selection) will be the preferred method; however, LCS (Least Cost Selection) and QBS (Quality Based 82 Selection) for very specialized services may be used as well. For small contracts estimated to cost less than US$lOO,OOO equivalent which may be procured using CQS. Single-source selection (SSS) procedures may be used, with prior agreement o f the Bank, for hiring services that meet the requirements o f paragraphs 3.10 o f the Consultants' Guidelines, for assignments when only one firm i s qualified or has experience o f exceptional worth. 8. The short list o f consultants in contracts estimated to cost less than US$500,000 equivalent, per contract, may be comprised entirely o f national consultants, inaccordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Specialized advisory services, including expert advising for design and carrying out o f the household survey will be provided by individual consultants selected through competition and comparison o f qualifications o f at least three candidates hired in accordance with the provisions o f paragraph 5.1 to 5.3 o f the Consultant Guidelines. Individual consultants may be selected sole-source with prior approval o f the Bank in accordance with provisions o f paragraphs 5.4 o f the Consultants Guidelines. 9. Operating Costs: would be procured using the implementing agency's administrative procedures, which were reviewed and found acceptable to the Bank. This includes transportation fares, travel expenses and per diem, either related to training, field work and supervision activities. 10. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts, are presented inthe Operations Manual. ASSESSMENT THE AGENCY'S CAPACITY TO IMPLEMENT PROCUREMENT OF 11. Procurement activities will be carried out by Undersecretary o f Labor Studies o f the MTESS through the Coordinationof Special Programs and Projects (CPyPE). 12. An assessment o f the capacity o f the Implementing Agencies to implement procurement actions for the Component 3 o f the project was carried by the Bank's procurement team. The assessment reviewed the organizational structure for implementingthe project and the coordination among the different institutions that would be participating inthe project implementation. 13. The key issues and risks concerning procurement for implementation o f the project have been identified and include: (i)the lack o f experience o f the Undersecretary o f Labor Studies in Bank's (financed) projects, (ii)the lack o f CPyPE's staff direct involvement in management o f procurement using Bank's procedures; (iii) the short term of the implementation o f the component jointly with the proposed designto be carry out and (iv) the difficulties duringimplementationprocurement processes during the last year by the UEC of Employment Secretary under 2 other Bank financed operations within the Ministry of Labor (MTESS)(7474-AR and 7369-AR). 14. To address these, the following measures have been agreed upon: (i) CPyPE the would hire a procurement consultant knowledgeable o f Bank procurement policies and procedures (with a minimumo f 5 years o f experience), (ii) before negotiations, a project operational manual would be developed including the implementation arrangements and 83 the procurement procedures, (iii) and submit the procurement plan for the first 18 define monthsfor project implementationbefore negotiations. 15. The overall project risk for procurement is SUBSTANTIAL. After considering mitigating measures, the residual risk i s considered as MODERATE. PROCUREMENTPLAN 16. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed betweenthe Borrower and the Project Team on March, 18,2009. It will also be available in the project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. FREQUENCYPROCUREMENTSUPERVISION OF 17. Inaddition to the prior reviewsupervisionto be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended annual supervision missions to visit the field to carry out post review o f procurement actions. The number of contracts signed that will be subject to Bank post review i s 1:5. Annex A8.1. Thresholds for Procurement Methods and Prior Review Firms -200 > QCBS Contract = > 500 and the first two (2) contracts for each selectionmethod Firms <200 QCBS, LCS, QBS, And all contracts awarded sss. with SSS procedures < 100 CQS Individuals 2.200 IC All contracts Any value sss All contracts 84 DETAILSOFTHE PROCUREMENTARRANGEMENTS INVOLVINGINTERNATIONAL COMPETITION 1. Goods andNonConsultingServices (a) List of contract packages to be procured following ICB and direct contracting are not foreseen (b) ICB contracts estimated to cost above US$1 million per contract, the first two (2) processes procured under each procurement method and all direct contracting will be subject to prior review by the Bank. 2. ConsultingServices (a) List of consulting assignments with short-list of international firms: 1 2 3 4 5 6 7 Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior / Submission Post) Date 1 National US$1,800,000 QCBS Prior Oct 09 Household Survev (b) Consultancy services estimatedto cost above US$500,000 per contract, the first two (2) processes under each selection method and all single source selection of consultants (firms) will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants inaccordance with the provisions of paragraph 2.7 of the Consultant Guidelines. (d) Individual consultants estimated to cost above US$200,000 per contract will be subject to prior review by the Bank. SPECIAL PROCUREMENTPROVISIONS 18. The following shall apply to procurement under the project: 85 General All procurement shall be done using standard bidding documents, standard requests for proposals, model bid evaluation forms, model proposal evaluation forms and contract forms previously agreed with the Bank. As for consultant services contracts, only the types o f contracts listed in Section IV of the Consultant Guidelines may be used and "Convenios" will not be permitted. Bidding documents for NCB shall include Anticorruption Clauses, including those that give the Bank audit rights over bidders, suppliers, contractors and consultants, acceptable to the Bank. These clauses shall be substantially identical to those pertaining to Bank Standard Bidding Documents for ICB. Foreign and local contractors, service providers, consultants and suppliers shall not be required: (i) register; (ii)establish residence in Argentina; or to (iii)enter into association withother national or internationalbidders as a condition for submittingbids or proposals. The invitations to bid, bidding documents, minutes o f bid opening, requests for expressions o f interest and notifications o f contract award o f all processes aimed at the procurement o f goods, works and services (including consultants' services), as the case may be, shall be published in the web page o f Oficina Nacional de Contrataciones ina manner acceptable to the Bank. The Borrower: (i)will feed the Bank publicly accessible Procurement Plans Execution System (SEPA) within 30 days o f Loan Effectiveness with the information contained in the initial Procurement Plan and will maintain such information updated at any time along project implementation for monitoring purposes and reporting, (ii)will review the Procurement Plan at least twice a year or as required to reflect the actual project implementation needs and progress and will feed the Bank Procurement Plans Execution System (SEPA) with the information contained in the updated Procurement Plan immediately thereafter. The Borrower will keep updated a list o f contracts signed under the project and such list will be produced by the Borrower's Financial Management System known as UEPEX. Bidders and consultants shall not be allowed to review or make copies or others bidders' bids or consultants' proposals, as the case may be. Goods, Non-consultant Services A two-envelop system of procurement will not be usedfor the procurement of goods, services (other than consultants services) or works. Contracts o f goods, services -other than consulting services- and works shall not be awarded to the "most convenient" bid but to the one that has been determined to be substantially responsive and the lowest evaluated bid, provided that further the bidder i s determined to be qualified to perform the contract satisfactorily. Inclusion o f the bidder in lists publishedby specialized magazines will not be an acceptable criterion for determining the qualification o f such bidder. 86 0 Compliance with I S 0 standards shall not be required as a condition for contract award. 87 Annex 9: Economic Analysis ARGENTINA: Basic ProtectionProject 1. Economic analysis involved simulating the potential impact o f expanded models o f the Seguro and Family Allowances programs. The objective o f this exercise i s to assess how these programs contribute to reduce poverty and increase human capital accumulation in Argentina. The analysis contains two sections. First, a discussion o f current impacts o f the programs on welfare i s presented, based on available data from household surveys and other sources. Then, a more analytical discussion about the potential effect that these programs might have on social indicators i s presented, to assess the role that these programs mighthave infuture social safety nets strategic choices. CURRENT IMPACTSOF SEGUROAND FAMILYALLOWANCES 2. To assess the current impact o f Family Allowances on social outcomes, an analysis comparingthe situation o f those receiving benefits with those not receiving them i s presented. This i s a preliminary analysis, based on historical data currently available. A more sophisticated assessment considering the impact o f each program in different social groups and the interactions among them will be possible using the planned Social Protection Survey, which will be collected with support from Component 3 o f this Project. 3. As expected, the analysis indicates that Family Allowances positively contribute to the accumulation o f human capital, as they have an impact on school attendance, health coverage and poverty incidence. Comparing social indicators for individuals and families with and without access to Family Allowances benefits (considering only those with income below the normative threshold for AAFF), significant gaps are found in favor o f the AAFF program beneficiaries. The data i s consistent across time, as shown by the stability of gaps inresults between those receiving and those not receiving allowances from 2004 to 2006. 4. On education, there are important differences in several indicators. Average human capital loss (that is, the gap between educational level attained and expected according to age) i s thirty percent higher among children o f school age (5-18 yrs old) that are not covered by family allowances than among those that are covered. As o f 2006, Children protected by the program lose 1.27 years o f education during their school-age years, while those with no benefits lose 1.64 years. Differences are also important on gross and net enrollment rates for pre-school (gross enrollment for beneficiaries i s already over 100 percent, while non beneficiaries are below 90 percent), secondary education rates (differences are around 15 percentage points) and for drop out rates at both the primary and secondary levels (where differences are important: drop out rates for non beneficiaries are between 3 and 2.4 times those o f beneficiaries o f FA). Interestingly, differences inprimary school enrollments are not relevant (in fact, they are even opposite to what could be expected). This can be explained by the near universal access to primary education in Argentina, thus making irrelevant the impact o f Family Allowances. 88 5. On health, available data are limitedto access to health insurance. Children with family allowances have a much larger coverage rate than those with no benefits, reflecting the fact that those children have access to health insurance provided to their parents through the formal social security system. Almost 90 percent o f children younger than 18 years and receiving Family Allowances benefits report being covered by a health insurance scheme, while only 26.7 percent of those with no AAFF benefits indicate that they have insurance. 6. Finally, poverty incidence differences are also important. Nearly one in five children with Family Allowances live in poor households, while one in seventy children o f this same group live in households affected by extreme poverty. On the other hand, more than half o f all children with no Family Allowances are poor, and one in four are below the extreme poverty line. Table A9.1. Human Capital Accumulationindicators,by access to AAFF benefits 2 4 2005 2006 Indicator of Human Capital Accumulatlon NithAAFF wlo AAFF with AAFF wlo AAFF with AAFF wlo AAFF Education (Children aged 5-18) Pre-primary school enrollment, gross (%) 111.6% 89.9% 108.3% 82.2% 102.4% 87.5% Pre-primary school enrollment, net (%) 49.9% 49.3% 52.8% 49.1% 51.1% 46.9% Primary school enrollment, gross (%) 102.0% 106.8% 104.5% 106.9% 102.8% 107.9% Primary school enrollment, net (%) 94.2% 94.7% 95.3% 94.7% 94.4% 95.0% Primary school drop-out rate (% of ages 6-12) 0.8% 0.8% 0.4% 1.0% 0.6% 1.9% Secondary school enrollment, gross (%) 61.O% 51.8% 77.4% 67.1% 78.4% 63.0% Secondary school enrollment, net (%) 60.3% 51.2% 75.5% 65.1% 76.3% 61.8% Secondary school drop-out rate (% of ages 13-18) 6.7% 14.4% 5.2% 13.0% 6.0% 14.4% Human capital loss (Averageyears per household 1.25 1.52 1.25 1.54 1.27 1.64 Health (Children aged <=18) With health insurance coverage 88.6% 22.4% 88.2% 24.1% 88.9% 26.7% Poverty Children in poor households 29.8% 74.3% 23.0% 68.0% 19.7% 59.3% Children in extremely poor households 4.3% 36.5% 2.9% 32.2% 1.4% 25.2% Source: Permanent household survey 2004,2005, -C 7. While these data do not exclude other possible explanations for the differences, the evidence offered is quite strong, inthe sense that bothSeguro and Family Allowances have a positive effect on social outcomes. POTENTIAL IMPACT OF FUTURE EXPANSIONS: A SIMULATION EXERCISE 8. In order to consider the potential impact of future expansions in coverage of Seguro or family allowances, a simulation exercise was carried out in the context o f the Income Support AAA. The relevant results are briefly reported inthis section. 9. Four simulations were conducted to assess the possible impact o f alternative policies. First, a universal transfers for the unemployed, which would simulate the expansion o f Seguro to all unemployed workers; second, the expansion o f Family Allowances to all households with children in the bottom two quintiles if the income 89 distribution, which would simulate the impact o f expanding Family Allowances beyond the formal workers. Inaddition, two other scenarios were included for comparisons with other options for poverty relief, a transfer to all poor households, and finally, Family Allowances pluspensions for the elderly inthe bottom two quintiles. Methodologiesfor Ex Ante Evaluation 10. The simulation exercise requires assumptions about the potential behavioral response o f beneficiaries. Although arithmetic simulations assume that policy changes will have a direct impact on individuals and households that participate inthe programs, behavioral models assume that some participants may change their behavior as a consequence o f the policy. For example, a CCT program may require that families send their children to school. Whereas an arithmetic simulation considers the impact o f the new transfer on the families that are already sending their children to school, a behavioral simulation would also consider the effect that the condition would have, as some families would now enroll their children inschool as a response to the program's incentives. 11. Modeling behavior i s o f course complicated, as it requires arbitrary judgments regarding participants' reactions to incentives. To advance in the analysis, the scenarios presented inthis report are arithmetic. 12. In the simulations the policy effects are assessed using a set of indicators. The indicators considered to assess welfare are (i) extreme poverty (ii) moderate poverty, (iii) the poverty gap, and (iv) inequality, as measured by the Gini coefficient. Also, two indicators about the size o f the program are included: (v) coverage inthe first and second quintiles, that is, the percentage o f households in these income strata receiving the transfer, and (vi) fiscal costs, interms o f annual expendituresas a percentage o f GDP (net o fJefes), TheData 13. The latest microdata available are from the Continuous Permanent Household Survey for the second half o f 2006. The Permanent Household Survey (EPH) is drawn from 33 urban centers with more than 100,000 citizens. Giventhat the EPH represents 71 percent o f the urban population, the survey represents about 62 percent o f the total Argentine population. The survey i s conducted over the whole year, and INDEC publishes statistics on a quarterly basis. The EPH data set provides information on the variables to be included in the simulations and on the outcome indicators o f welfare. The EPH collects a wide range of socioeconomic statistics regarding labor, income, education, and demographic variables. 14. The distortions in simulation results due to existing programs are potentially significant, especially the programs with high levels o f coverage. At the beginning o f 2008, the Moratoria, Familias, and Jefes all had a critical mass o f beneficiaries3' The case o f the Moratoria i s particularly troublesome for the simulations, as the data set used to buildthe baseline, from 2006, was collected before most beneficiaries o f this programs began receiving their payments. To reduce the impact o f these distortions, the baseline 30The Moratoria was a programimplementedin 2006-2007 that grantedretirement benefitsto nearly 1.7million older citizenswho did not have adequatecontributionhistoriesfor the pensionsystem. 90 was updated to consider the likely impact of the Moratoria. Inthe case of Familias and Seguro,no corrections were possible. 15. The adjusted baseline for 2007 is based on three assumptions. First, all monetary variables, including transfers, poverty lines, and others, were kept constant in real terms, based on 2006 prices. Second, elderly people in the sample were randomly assigned a Moratoria benefit, controlling for the gender and previous distribution of beneficiaries obtained from administrative sources. This includes 80 percent of women and men (minimum ages 60 and 65, respectively) without pension coverage, and 20 percent of women age 60 or above who already receive pensions, if there were no male pensioners in the ho~sehold.~'Third, the extension in coverage went from highest to lowest quintiles. 16. As expected, the new baseline shows improvements in all welfare indicators relative to 2006, and the same indicators would deteriorate ifJefes were to be eliminated. Table A9.2 shows the relevant indicators for the original baseline, the adjusted baseline (that is, includingthe Moratoria), and the adjusted baseline without Jefes. It i s interesting to note that Moratoria had apositive impact on all welfare indicators, as extremepoverty, total poverty, the poverty gap, and the Gini coefficient improve when the baseline i s adjusted. However, most of these impacts would be fully compensated ifJefes were to be simply closed with no other program to replace it. The extreme poverty, poverty gap, and Gini indicators would be worse ina scenario with Moratoria but without Jefes thaninthe situation at the end of 2006. Table A9.2. Adjusted baselinedata used for the simulations Adjusted Adjusted Baseline Baseline minus (including moratoria) Jefes extremepoverty 8.6 7.8 8.9 26.4 25.0 25.8 11.0 10.2 11.2 0.482 0.477 0.482 Spending(YOof GDP) 8.20 9.11 8.89 Source: Authors' calculations based on EPHC. The Simulations 17. This section presents four scenarios under which each transfer i s simulated applying a simple arithmetic model. The alternatives are stylized and are general tools for illustrating how a specific policy might work in practice. In this sense, the analysis assesses the potential impact of (i) universal transfers for the unemployed, (ii) transfers to poor households, (iii) FamilyAllowances for householdswith children inthe bottom two quintiles, and (iv) Family Allowances plus pensions for the elderly in the bottom two quintiles. Table A9.3 presents the basic characteristics of each scenario. 3 'According to administrative data, a majority (90 percent) of Moratoria beneficiaries were women. Many beneficiarieswere already receiving a survivors' pension, thus resulting in a duplication of benefits. 91 IScenario I Description Beneficiaries Transfer (A@) 1 Universaltransfer All unemployedworkers, regardless AR$400 per month for the unemployed of their previous formality or informality status 2 I Transfer to poor I All householdsbelow the poverty AR$400 per month households line 3 Non-contributory All children of families inthe lowest AR$l55 per child Family Allowances two quintiles per month (on average, AR$401 per family) AR$l55 per child Family Allowances two quintilesplus per month (on average, AR$401 pensions not receivingpensions per family) AR$270 per month Source: World Bank staff. 18. The potential impact o f each scenario is assessed in comparison with the baseline along six indicators. The baseline scenario is the situation as o f late 2006, adjusted by the impact o f the Moratoria program. For the baseline and each scenario, six indicators are shown; four o f them capture welfare, and the remaining two focus on the coverage and fiscal costs. The welfare indicators are extreme poverty, moderate poverty, the poverty gap, and inequality (as measured by the Gini coefficient). The other two indicators are the coverage o f the lower two quintiles o f the income distribution, and the total expenditure on income transfers (including all social security, Jefes, Familias, and Seguro programs). 19. The following sections present the results o f each scenario. The results o f the simulations are presented in a hexagonal graph (figures A9.1 through A9.4), where each axis represents one indicator. Data have been normalized to the baseline, to show relative variations. Thus, a result o f 0.83 for the extreme poverty indicator implies that, in such a scenario, extreme poverty incidence would be 17 percent lower than in the baseline. In the second panel o f each figure the number of beneficiaries, average benefit, and value of the six indicators are also presented. A Universal Transfer for the Unemployed 20. The first scenario is atransfer to all unemployed workers, analogous to the Seguro benefit, regardless o f their income levels. The benefit would allocate a transfer o f AR$400 per month to all unemployed workers. This would involve approximately 1 million beneficiaries. 92 FigureA9.1. Simulationresultsfor a transfer to the unemployed - -baseline -Scenario I beneficiaries individuals 1,049,198 lbenefit ARS 400 extremepoverty Welfare indicators extremepoverty 6% 22% annualexpenditure in poverty poverty poverty gap 9% 0.90 Gini 0.464 0.87 Program size coveragequintiles 1 coverage quintiles 1 and 2 19% and 2 0.97 poverty gdP %GDP intransfers 9.66% Diffwith baseline(%ofGDP) 0.55% Gini Source; Authors' calculationsbased on EPHC, and administrativedataon expenditures; ANSES, MTESS, MDS. 21. The transfer to all unemployed workers would have marginal effects on welfare. FigureA9.1 shows the expected impacts o f such a program. Thus, a transfer program for all unemployed workers would result in a decline in extreme poverty o f 17 percent (from 1 to 0.83 in the figure), a reduction o f 10 percent in poverty and o f 13 percent in the poverty gap, and a reduction o f 3 percent for the Gini coefficient. To achieve this, coverage o f this program would be 54 percent larger among households in the first and second quintiles, and the total cost o f income transfers (including current social security and social assistance programs) would increase by 6 percent, or more than half a percentage point o f GDP. Poverty Relief Transfer 22. A transfer to poor households would provide a flat benefit per month to all households with incomes below the official poverty line, regardless o f household size. This benefit would reach 1.2 million beneficiaries and would provide a benefit level o f AR$400 per month. Considering that the poverty line i s about AR$280 per capita, not every household would move above the poverty line after receiving the benefit, although most would leave extreme poverty. 93 FigureA9.2. Simulationresultsfor a transfer to poor households - -baseline -ScenarioII beneficiaries households 1,198,646 benefit ARS 400 extremepoverty Welfare indicators nnual expenditurein extremepoverty 2% '2 transfers poverty 15% poverty gap 4% Gini 0.441 3 5 O pS coverage quintiles 1 Program size and2 coveragequintiles 1 and2 44% Gini %GDP intransfers 9.77% Diffwith baseline(% of GDP) 0.66% Source: -1thors' calculations -.sed on EPHC, and aiAnistrative data on expenditures ANSES, MTESS, MSD. . - 23. A transfer targeted to the poor population would have a more significant redistributive impact than the first scenario. As shown in Figure A9.2, a program for the poor would reduce extreme poverty by 73 percent and poverty by 42 percent. The poverty gap would fall from 10.2 percent to 4 percent, and the effect on inequality would be the most substantial o f all scenarios, declining approximately 7 percent and reaching a Gini coefficient o f 0.44. Coverage would substantially increase, by a factor o f three, to reach 44 percent o f first- and second-quintile households. However, the overall cost o f this program would be very similar to that of the previous scenario, since the marginal expenditures would amount to 0.7 percent o f GDP. Given these indicators, it i s clear that this would be a muchbetter targeted transfer thanthe previous one. Famiij Allowancesfor Households in the Lowest Quintiles 24. Under the third scenario each family in the bottom two quintiles would receive a transfer for each child under 18 years old. This policy, would provide AR$l55 per child, an amount that would result, on average, in nearly AR$401 per month. Households that have already qualified for contributory Family Allowances-for example, those where the household head or spouse is formally employed and households in the third quintile or above-would not be eligible for the benefit. 94 FigureA9.3 Simulationresultsfor a transfer to householdswith childrenunder 18 beneficiaries households - 939,245 -baseline -Scenario I11 benefit per child ARS 155 Welfare indicators extremepoverty extreme poverty 3yo poverty 20% annualexpenditure m poverty poverty gap 6% transfers 0.34 Gini 0.457 0 I 9 3 0 0 56 Program size coveragequmtlles 1 and2 poverty coverage quintiles 1 and 2 38% %GDP intransfers 9.58% Diffwith baseline (%ofGDP) 0.47% Glnl Source: Authors' calculations basedon EPHC, and administrative data on expenditures ANSES, MTESS, MSD. - 25. A benefit targeting children in the bottom two quintiles would have a notable impact on the bottom o f the income distribution, at the lowest cost. Figure A9.3 shows that extreme poverty would drop by 66 percent, while poverty would decline by 21 percent. The poverty gap would also drop by 44 percent. The coverage o f the bottom of the income distribution would more than double, to 38 percent. This policy would be less costly than the other scenarios, at 0.47 percent o f GDP, a level o f expenditure comparable to expenditures on non-contributory poverty relief inOECD countries. Family Allowances Plus Pensionsfor Elderly People in the Bottom Quintiles 26. As mentioned, most of the elderly population without pension coverage has been integrated into the Moratoria. Though available data make it impossible to know the exact number and characteristics o f the elderly that continue to be excluded from the system, the third scenario assumes that those who did not join the program were the poorest in the distribution. Therefore, the scenario involves extending the Moratoria to those people 65 years o f age or older in the first or second quintile. The benefit i s set at AR$270 per month, the average amount received by those who joined the Moratoria. In this last scenario, this benefit's impact was estimated inaddition to the family allowances simulation o f the third scenario, which would replace Jefes as the main income transfer for younger families. 95 Figure A9.4 Simulation resultsfor family allowances and a transfer to the elderly -baseline -Scenario IV beneficiaries children 2,428,378 elderly 295,378 extreme poverty benefits children ARS 155 elderly ARS 270 annual expenditurein transfers 0.34 poverty Welfare indicators 0 I 9 extreme poverty 4% 0 56 22% coverag qumtiles3 H poverty and 2 7% 0.460 Gini Program size coverage quintiles 1 and 2 47% % GDP intransfers 9.73% Diffwith baseline(%o fGDP) 0.61% Source: Authors' calculationsbased on EPHC, and administrativedata on expenditures - ANSES, MTESS, MSD. 27. Because most o f the elderly are already receiving benefits, the additional impact o f this scenario would be minor. In fact, the results o f the simulation indicate that all welfare indicators would have the same levels as inthe previous scenario. Inother words, providing universal pensions would not result inadditional welfare for the population. On the other hand, coverage would be higher, at 47 percent of the lowest two quintiles, compared with 38 percent in the previous case, and the 'marginal spending in relation to the baseline would be 0.61 percent o f GDP. What these results clearly indicate is that, given the already considerable impact o f the Moratoria, further expansions o f pension coverage would have little welfare impact but some effect on fiscal costs. 28. This simulation exercise masks the complexity of implementation and the political economy involved in any reform o f existing programs. The simulations represent extremely simplified models o f reality, where no implementation challenges, political economy considerations, or other obstacles are considered. Underthese scenarios, perfect targeting, no errors or coverage gaps due to operational or design problems, and high efficiency in management are all assumed. Of course, in real-world politics there are many immediate and potential problems which must be carefully considered. 96 Annex 10: Social Assessment ARGENTINA: Basic Protection Project SOCIAL ASSESSMENT OF INCOME TRANSFERS (INCLUDINGSEGURO AND FAMILY ALLOWANCES) 1, The design o f the Project was informed by extensive consultations on the role and design o f income transfers. This included two main instruments: first, consultations with policy makers and practitioners in social policy, mainly at the provincial level; and second, a nationally representative opinion survey on the views and perceptions o f the p ~ p u l a t i o nThe~ consultations were conducted first, at the end o f 2006 to map out the . ~ range o f views among stakeholders at the provincial level. The consultations also included a number o f selected interviews with key figures in social protection at the national level. 2. The results o f the consultations inspiredthe design o f the national opinion survey which was fielded between June and August 2007. These consultations found converging views around the intersection o f employment and social policy, views toward cash benefits and contraprestaciones (conditionalities), and the role o f provincial governments in social policy-making. The questionnaire for the opinion survey was formulated around the issues that emerged from the consultations with the aim of designing the survey to test and quantify the extent o f these perceptions among the population. 3. The stakeholder consultations were undertaken by a team led by the Universidad Torcuato di Tella (UTDT) in close collaboration with the World Bank.33 The consultations were held between September and December 2006 inten provinces.34Over 300 individuals were interviewed, including provincial and municipal government officials, representatives from NGOs, trade unions, the church, regional universities and other key local officials. The interviews were open-ended following a common interview guide. More information on the approach o f the consultations i s included inAppendix 2. 4. The National Opinion Survey, the Encuesta de Percepcidn de Planes Sociales (EPPS), was conducted between mid-June and mid-August, 2007.35It was undertakenby a joint team o f Equipos MORI Argentina and the Centros de Estudios Distributivos y Laborales de la Universidad Nacional de La Plata (CEDLAS). The survey includes a survey o f 2,500 cases and was designed to be representative at the national and regional levels. In each case, either the head o f the household or spouse was interviewed, dependingon their availability. 5. In addition to the national sample, the survey included an module o f questions that was applied to a sub-sample o f 600 potential beneficiaries o f social programs, to deepen the analysis among the target populations. Selection o f interviewees into the over- 32The findings of the consultationsand survey are summarized inArgentina: Income Support Policies towards the Bicentennial, ReportNo. 44194-AR The World Bank: Washington, DC. 33The findings from the consultations are synthesized in Bonvecchi and Smulovitz, 2007. 34The provinces are: Buenos Aires, Corrientes, Chaco, Chubut, Mendoza, Misiones, Rio Negro, Salta, Santa Fe and Tucuman. 3sThe findings from the EPPS are synthesized in Cruces, Rovner and Schijman, 2008. 97 sample was based on self-reported income. The survey questionnaire included a sub- module for the over-sample which includedspecific questions relevant to the beneficiary population on adequacy of benefit amounts, contraprestaciones, the duration of programs, and views regarding training and other forms of labor market insertion to accompany program design. Familiarity and Experience with Programs 6. Jefes i s widely known among the population, while newer programs are less recognized. When asked to name social programs in the EPPS, 93 percent of those interviewed mentioned Jefs (Figure Al0.l).36 share of the population (61 A large percent) also mentioned Trabajar, the predecessor to Jefes which was discontinued in 2001, suggesting recognition of the plans, but less familiarity with recent developments. These findings illustrate the widespread familiarity with the emergency programs - especially Jefes- because of the high level of coverage within the population, as well as the significant media attention to the program. 7. On the other hand, newer programs, particularly Seguro de Capacitacidn y Empleo and Familias, were much less recognized. Only two percent of interviewees mentioned Seguro spontaneously. When prompted with a list of programs and asked which were familiar, the number of respondents indicating familiarity increased to 42 percent. Similarly with Familias, only 4 percent mentioned the program unprompted, while 55 percent recognized it from a list. These findings are not surprising, given that the programs are not yet fully implemented across the country. Figure A1O.l. Familiaritywith SocialPrograms(spontaneous and guided responses) Plan Jefesy Jefasde HogarDesocupados PlanTrabajar Plan Familias Segurode Desempleo Seguro de Capacitaci6n y Empieo Familiar IUnfamiliar Source: Calculations basedon EPPS (CEDLAS-MORI-BM, 2007). Base:total sample. 8. Beyond basic name recognition, the survey also asked respondents about their knowledge of the eligibility criteria for participation in the programs. The findings 36Spontaneousresponseplusguided (intervieweewas asked to select programsfrom a list); 62 percentmentionedJefes spontaneously. 98 indicated a relatively broad knowledge of basic characteristics of eligibility, 54 percent of interviewees recognized that unemployment was a criteria for receiving the program, 40 percent identified poverty and 36 percent identified having children in the household as necessary. In addition to the eligibility criteria, 87 percent recognized that contraprestaciones were a requirementfor receiving benefits. 9. A significant share of the population has had direct experience with social programs, again reflecting the high coverage ofJefes. Inthe EPPS, 20 percentof heads of households interviewed indicated that either they themselves, or a household member, had received a benefit during the last five years (2002-2007). This level of coverage is reflective of the peak level of coverage reached by Jefes in 2003. O f this 20 percent, 82 percent reported a monthly income below AR$1,249 - the level of median total family income at the time of the survey. On the other hand, 12 percent of respondents indicated that during the last five years, a family member had applied for a program but did not receive a benefit. Figure A10.2. Interaction with Social Programs (2002-07) Haveyou ever had one of these plans which give money monthly? 14% Hasyour spouse had any of these planswhich give money monthly? And has any other member of your family had one of plans which give money each month? Haveyou or any member of your household ever been offered a plan and not accepted it? Haveyou or any member of your household sought out or requesteda plan and didn`t receiveit? Haveyou ever consideredenrollingin a plan? (Base:Those interviewedwho weren't part of a 14% plan and whose spouse wasn't either) Source: Calculations basedon EPPS (CEDLAS-MOM-BM, 2007). Base: total sample. Views about Programs 10. The survey indicated that the population generally supports the social programs, but also signaled concerns about their implementation. When askedwhether to "leave the programs as they are" or "eliminate them without replacing them," half of respondents opted to leave the programs as they are, and 28 percent would opt to eliminate them. The remainder chose neither, or did not respond. This suggests that there is a large share of the population that finds value in the programs, despite concerns about implementation (discussed further below), while at the same time, a significant group feels strongly enough to suggest that the programs should be eliminated entirely. 11. As would be expected, beneficiaries were more enthusiastic about keeping the programs unchanged (71 percent), while the share who would opt to eliminate them was substantially higher (44 percent) among those who did not receive benefits. Approval of the programs appears to decline with age. Among those between 18 and 35 years old, 19 99 percent would eliminate programs, while this increased to 27 percent for those between 36 and 55 years old, and 34 percent for respondents older than 55. Figure A10.3. Overall Views on Existing Social Programs (leave or replace them) Doesn't know, 6% None, 16% Eliminate the plans and don't replace 1:hem, 28% Source: Calculations based on EPPS(CEDLAS-MOM-BM, 2007). Base: total sample 12. The survey illustrated an overall view that the social programs play an important policy role and have an effect on economic and social issues in the country. A majority (61 percent) agreed that "programs are always neededbecause there are people who need them," while 28 percent agreed that "programs are only needed during economic crises." Support for permanent programs, rather than temporary during crises only was strongest among people inthe poorest regions, young people, and those with beneficiaries living in the household. Similarly, 41 percent believe that poverty would be worse in Argentina without the programs, 38 percent think that unemployment would be worse, and 37 percent think that inequality would be negatively affected.37 13. The survey results suggest deep concerns about the design and implementation o f the programs. A large majority (58 percent) of respondents either disagreed, or disagreed strongly that the programs should continue as they are, while only 21 percent agreed that the programs are fine without changes. The main concerns with the programs indicated in the survey were issues with access, low benefit levels, and lack o f information about eligibility. 37Poverty, unemployment and inequality were separate (not mutually exclusive) choices in the question 100 Figure A10.4. General Evaluation of Programs (agreement with the statement: "the programs work well and should be left as they are") Agree + strongly Doesn`tknow/No - agree answer -.._.. . 21% Neither agrees or ` Disagree + strongly disagree, 58% Source: Calculations based on EPPS (CEDLAS-MOM-BM, 2007). Base: total sample. Perceptions of Beneficiaries 14. Within the EPPS sample 17 percent o f respondents, or their spouses, reported receiving some type o f a social benefit between 2002 and 2007. Programs received included: a mix o f national programs including Jefes (60 percent), Familias (24 percent), and Seguro de Capacitacibn y Empleo, as well as one o f a range of provincial level programs.38 15. In terms of the overall evaluation of the programs, 35 percent of beneficiaries reported that they believed that their quality o f life had improved from participating inthe program, and 26 percent maintained that their potential to get a job had improved. The majority reported that both their quality o f life and employment prospects had stayed the same regardless o f receiving the benefit (57 and 66 percent respectively). These results may not necessarily represent a negative assessment, if interviewees did not include the counterfactual in their assessment. In other words, in the absence o f the benefit their quality o f life and employment prospects might have worsened further. 16. O f those respondents (or their spouses) who reported having received a benefit during the reference period, 66 percent were continuing to receive benefits at the time o f the survey. For those who were no longer receiving benefits, the main reason cited for going off benefits was getting a job (36 percent) (Figure A10.5). Other reasons for discontinuing participation were that the program ended (8 percent); retirement (7 percent) or failure to meet the eligibility criteria o f the program (6 percent). 17. The survey also reflected the government's strategy o f shifting Jefes beneficiaries to the new programs. One-quarter o f the interviewees who reported receiving a benefit 38Provincialprogramsmentionedincluded:PlanBonarense, Fondode Desempleo, PlanVida, Vale lo Nuestro, and Plan Primer Pasoy PlanMedicamentos. 101 noted that they had transferred from Jefes to another program. The majority o f cases, this transition was one year or less from the time o f the survey. The main reason cited for switching programs was that the new program offered a higher benefit level. FigureA105 Reasons for ExitingBenefitPrograms -- Ireallydon't knowwhy,theyjuststopped giving it to me 16% It was suspended 16% The program ended Ididn'tneeditanymore 8% Iwasaskedtoretireandtheystoppedgiving it to me/I retired 7% Ididn'tfulfilltherequirementsbecauseofthe children's age 5% Icouldn'tcompletethe"contraprestacion" because of illness The recipient died 1% Ididn'tcarryoutthecontraprestacion 1% Istoppedparticipatingin"piquetes" 1% Move (the person who gave it out or the beneficiary) 1% Other 1% Source: Calculationsbased on EPPS (CEDLAS-MORI-BM, 2007). Base: Respondentswho hadreceived (or whose spouse received) a benefit inthe past. Program Design 18. Public opinion cannot determine the designo f social policies, however it can be a useful input for policy makers in understanding preferences and determining what design aspects may work better in practice. Because the recent experience o f the emergency programs i s fresh in the minds o f the Argentine public, these perspectives can be particularly useful. The survey uncovered strong preferences and views regarding key design issues including conditionality for receiving benefits, targeting, benefit levels and the intersectionbetweenincome support and employment policies. 19. There is nearly unanimous consensus in Argentina for the need for contraprestaciones, or some form o f conditionality to be included inthe design o f social programs. Contraprestaciones refer to the requirement for participation in work activities (including community services or attendance at education or training courses) for a specific number o f hours a week. Popular awareness i s highbecause o f the incorporation o f contraprestaciones into the Jefes program. Proponents o f all three visions in the consultations expressed unanimous support for contraprestaciones. Stakeholders indicated that a requirement to work should be obligatory because o f the persistence o f poverty and unemployment, and as a means to discourage welfare dependency (asistencialismo). 102 20. Support for conditionalities attachedto benefit receipt was nearly the same within the EPPS survey. Ninety three percent of interviewees agreedthat beneficiaries neededto "do something in exchange for receiving benefits." When asked about preferences regarding the type of conditionality, the majority (58 percent) supported a work requirement, while others supported participation in training courses (42 percent), a requirement that beneficiaries be actively seeking work (36 percent), or participation ina productive community project (20 percent). 21. Among beneficiaries surveyed in the EPPS, an overwhelming share (89 percent) reported that they had actually participated in some form of contraprestacidn (Figure A10.6). The majority participated in a work activity (55 percent), while the second most common activity was compliance with school attendance (27 percent) and health check- ups for children(26 percent). Figure A10.6. Type of Contruprestacio'n Work in exchange for the plan (without receiving another salary orwage) 55% Check children'sschool attendance Regular health checks for children Attend employment training Participate in some community organization (feedingprogram) Finish primary or secondary school Actively seek work None of the above Work for a political organization Care for a disabled spouse Source; Calculationsbasedon EPPS (CEDLAS-MOM-BM,2007)). Base: Respondents who hadreceived a benefitandparticipatedin some form of contraprestacidn. 22. Views regarding targeting did not converge as clearly as for contraprestaciones. Most stakeholders expressed a preference for universal programs inthe consultations, but recognized that some level of targeting was necessary because of resource constraints. Proponents of the rights-based vision support a basic universal citizen's benefit, while supporters of the other two visions expressed the need for some form o f targeting. The EPPS survey also indicated support for some level of targeting. When asked which criteria should be applied in determining eligibility for support, the most common 103 responses in the EPPS were the disability and inability to work (56 percent), unemployment (47 percent), and poverty (42 percent).39 23. The survey indicated a strong preference for tightly targeted programs, rather than loosely applied eligibility criteria. The majority o f respondents (60 percent) would prefer to have eligibility criteria for benefits rigidly applied, even if it would mean that some people in need would be left out. Incontrast, 17 percent o f the population would opt for more flexibly applied criteria that would potentially include beneficiaries who did not need support. 24. Another key design aspect i s the level of benefits. Despite the ambivalence about cash transfers indicated in some aspects o f the survey, the general message on this issue was that current benefit amounts are too low, and should cover basic household needs and not food costs alone - for example clothing and transportation. More than 80 percent o f interviewees agreed that benefits are not sufficient to meet monthly payment obligations. In households with a beneficiary, 67 percent o f respondents agreed that the benefit should go beyond basic subsistence needs. Similarly 78 percent o f beneficiaries were in favor o f increasing the benefit amount o f Plan Jefes above the current AR$150 per month (Figure A10.7). Figure A10.7. Preferred Amount of Monthly Plan Jefes Benefit Between Between Between Between Between $600 or Doesn't $151 and $200 and $300 and $400 and $400 and more know/no $ 1 99 $299 $399 $499 $599 answer Source: Calculations based on EPPS (CEDLAS-MORI-BM, 2007). Base: Respondents who relieve that the amount of the Jefes benefit should be changed. 25. While most agree that benefits should be increased, few are willing to pay the cost o f doing it. Even though the survey indicated a strong interest in increasing benefit amounts, there was also a strong rejection of the idea that this increase should be financed through a reduction in the budget for education (90 percent against) or health (89 percent against), or an increase intaxes (79 percent). These sentiments signal an awareness o f the tradeoffs that income support policies entail. 39Multiple responseswere allowed for this question 104 26. Respondents also indicated a preference for receiving benefits incash, rather than in-kind. Sixty five percent expressed support for cash and 35 percent for in-kind. In a related question on the logistics o f benefit delivery, 48 percent expressed a preference that transfers should be provided only to the mother, or female head o f household, while only 8 percent preferredthat the benefit should go to the male head o f household. 27. Figure A10.8 presents preferences o f the interviewees regarding other aspects o f the delivery and administration o f income support programs. There was a notable agreement that benefit amounts should be higher for larger families with more children (74 percent). There was also general agreement that benefits should be provided only for a limited period of time and each household should receive only one benefit at a time. Finally, the survey found a polarization between those who thought foreign residents should be eligible for benefits (37 percent) and those who did not (44 percent). FigureA10.8. Opinionson Form of Benefits They shouldgive more Theyshould onlygive Familiesshould receive Plansshouldalso be moneyto familieswith oneplan per family plansfor a limitedtime givento foreign more children residentswho need them Strongly agree + agree Neither agree or disagree Strongly disagree + disagree Doesn't know/No answer Source: Calculations based on EPPS (CEDLAS-MOM-BM, 2007). Base: Total sample. 28. Beneficiaries and potential beneficiaries expressed an overwhelming preference for programs which would facilitate entry to employment. The module explored policy options in a number o f ways. First respondents were asked to choose among three different program options: first, Jefes, with a benefit of AR$150 pesos per moth, and two hypothetical programs, one similar to Familias, described as a benefit o f AR$l25 pesos per moth with an additional AR$25 per child and no work requirement, and the second corresponding to Seguro, a plan o f AR$225 per month which offers training and access to employment services for a maximum o f two years. There was overwhelming support for the third option (72 percent), signaling that Seguro would be preferred among the potential beneficiary population. The results did not indicate any difference according to socioeconomic characteristics (e.g. number o f children, employment status). 105 FigureA10.9. The choice between Jefes and HypotheticalPrograms (FarniliasLSeguro) A planwhich pclys $225 per month,offering trohingand accessto employmentagencies for a 72% madumumof twoyears A planthat pays$125 per month, plus $25 for each child,with noobligatory work inthe commurliy PlanJefes, withthe sameconditionolles asnow ($150 per monthfor working h the commvn an as yet undeterminedperiod) Source; Calculationsbasedon EPPS(CEDLAS-MOW-BM,2007). Base: Sub-module. 29. In order to explore this question of policy preference further, the sub-module included additional questions around five hypothetical program options. They varied according to benefit amount (ranging from AR$150, 250, 400 per month), duration, extent o f work requirement (contraprestacidn), and relation to the labor market (e.g. provision o f training, employment at the end o f the program). The results indicated a strong preference for higher monthly benefit amounts, even if this would imply greater commitment to meeting conditions and complying with contraprestaciones. On the other hand, respondents expressed a preference for lower benefits in exchange for training, access to employment services (bolsas de trabajo), or a concrete job offer. 30. These results indicate a preference for employment oriented social programs, similar to the design o f Seguro de Capacitacidn y Empleo (Figure A 10.10). Respondents prefer programs which will provide tangible benefits inthe labor market, even ifit means receiving a lower transfer amount. At the same time, the responses indicate a preference for higher benefits even ifthey are associated with a higher level o f contraprestaciones or conditions such as school attendance or health checks for children. Potential beneficiaries would also prefer to receive a higher level o f benefits, rather than receiving less over a longer period o f time. 3 1. Population groups which are more likely to be disconnected from the labor market are more likely to prefer employment-related benefits. Multivariate analysis found that respondents inthe poorest regions o f the country, young people and those with low levels o f education were more likely to choose the policy scenarios linkedto labor market entry (training, employment services, or a job offer). On the other hand, respondents from households which had recently received benefits and residents in large cities were more 106 likely to opt for program scenarios with a larger benefit amount.. Finally, women respondentswere more likely to chooseprograms promising training. FigureA1O.lO. PreferredCharacteristicsof Social Programs(sub-module) If a securejob will be dfered when the planends 65% If employmenttrainingis offered duringthe plan 38% How longthe planlasts 32% 1 If healthand schod certificatesshould be presentedinexchange 28% The amountof hoursperday that should be worked inexchange 23% First option Doesn`tknow/No answer Total mentions Source: Calculations based on EPPS (CEDLAS-MOM-BM, 2007). Base: Submodule. Conclusions 32. The general consensus in Argentina is that the current income support programs are important.40 Less than 30 percent of the population would eliminate income support programs if they could not be improved. A majority (61 percent) agreed that "programs are always needed because there are people who need them," whereas 28 percent agreed that "programs are only needed during economic crises." Similarly, 41 percent believe that poverty would be worse in Argentina without the programs, 38 percent think that unemployment would be worse, and 37 percent think that inequality would be negatively affected. 33. The surveys showed general agreement among stakeholders that the emergency programs (that is, Jefes) were appropriate for the post crisis period and had served their purpose. However, there was also agreement on the need for a longer-term vision and strategy. Respondents did not express any particular disagreement with the transition strategy to the new Seguro and Familias programs but showed concerns about whether the programs would be enoughto satisfy the existing demand for social policies. 40Two instrumentswere usedto assess the population views: first, over 300 consultationswith stakeholders at the provincial level, and second, a national opinion survey (EPPS). Both are discussed in chapter 3 of this report. 107 34. A major theme emerged surrounding the link between income support programs and the labor market. While there is debate about the level to which social programs should be linked to the labor market, both the consultations and the survey sent strong messages, that employment should be an objective of social policy, and that labor market incentives and opportunities should be considered in policy design. Related to this sentiment, there was nearly universal support (93 percent in the EPPS) for contraprestaciones, or for some form of conditionality to be included in the design of social programs. 35. The potential beneficiary population expressed a strong preference for programs with tangible labor market outcomes, similar to Seguro. Beneficiaries prefer programs that would provide training, employment services, and ideally a guaranteed job upon completion, even if it would mean a lower benefit amount or duration of eligibility. This finding indicates support for the type of program the government is currently introducing: the Seguro de Capacitacidn y Empleo. Also, it suggests that other programs, such as Familias, could be adapted to incorporate more of a labor market orientation, for example, through the introduction of training opportunities or work requirements. SUMMARY OF INDIGENOUSPEOPLESPLANNING FRAMEWORK4' 36. The legal framework in Argentina is established by the Constitutional Reform of 1994 in its Article 75 where it guarantees respect for the cultural identity of Indigenous peoples and their right to a bilingual and inter-cultural education: recognition of the legal status of their communities; andthe communal possessionand ownership of traditionally- held lands. It also establishes the needto ensure their participation inthe management of natural resources. Argentina has ratified the International Labor Organization Convention 169. 37. The main legal regulations at national level on indigenous' rights are the following: 0 Law No 23,302 on Indigenous Policy and Support to the Indigenous Communities. 0 Law No24,071 ratifying of Agreement No 169 of the International Legal Organization on Indigenous and Tribal in Independent Countries. This Agreement promotes the respect by the cultures, life forms, the traditions and the right of indigenous and tribal. 0 Law No24,375 Agreement of biological diversity Regulation of the National Institute of Indigenous Issues (INAI) No4811/96, that it establishes requirements for the inscription of the Indigenous Communities in theNationalRegistry of Indigenous Communities (RENACI). 0 Resolution INAINo152/2004 and its modifying No301/2004 that establishes the Council of Indigenous Participation (CPI) 38. Estimates of the size of the Indigenous population in Argentina vary from 400,000 to 1.5 million. In the 2001 Population Census, 2.8 percent of households included at least one person who recognized themselves as Indigenous. Provinces with 41This annex presents a summary ofthe IPPFpresentedby the Borrower in Spanish. 108 the highest proportion of Indigenous households are Jujuy (10.5 percent), Chubut (9.7 percent), Neuquen (8.6 percent), Rio Negro (7.9 percent), and Salta (6.4 percent). Almost a quarter of Indigenous households have unmet basic needs, compared to 14 percent for all households in Argentina. Only 10 percent of the Argentine population lives in rural areas, but the share is 16.5 percent for the Indigenous population. 39. Among the Indigenous population older than 10 years, the illiteracy rate is 9 percent, three times greater than the national average. Slightly less than 80 percent of the Indigenous population older than 15 years secondary education, while a third have not completed primary. This compares with shares for the population as a whole of 67 and 18 percent, respectively. 40. At the present time and with the countrywide information available the municipalities that have indigenous peoples which would trigger of OP 4.10, as per the criteria of OP 4.10 are112 municipalities in 14 provinces, listed in Annex Iof the Indigenous Peoples Planning Framework (IPPF). 41. The proposed project will target participants currently in the Seguro de Capacitacidn Empleo Program. The location of activities for Seguro depends on the location of municipal employment offices. After a screening carried out in coordination with the Bank, the Government has estimated, as o f now, that about 17,000 Seguro's participants belong to 25 municipalitiesof the 112 mentioned inthe preceding paragraph. There is not sufficient informationto know the extent to which indigenous communities participating inthe Seguro would be present inthose municipalities. 42. Inaddition, it is expectedthat more municipalities will be includedinthe Seguro during project execution, and they might also trigger OP 4.10 ( as they might be included inthe 112). 43. The Ministry of Labor is committed to assisting indigenous peoples and encouraging their participation as project beneficiaries through a number of specific actions aiming at including and reaching out to this sector of the population. For example, The Ministry of Labor has for Seguro prepared bilingual materials to inform indigenous communities in Formosa, allowed for Community (as opposed to individuals) participation of Mapuches in Neuquen, and organized a gathering of concerned stakeholders at the request of Diaguitas inLa Rioja. 44. The project will build on the experience of the Lifelong Learning Project in provinces working at present time with indigenous peoples. The services offered by Seguro (education and training) and beneficiary population are the same for the Lifelong Learning and Seguro projects, and the implementation agency i s the same for both projects. Thus, in order to avoid duplicating efforts, the Ministry will work with Municipalities and provinces to ensure that the IPPs for both projects are consistent, supporting the same actions to ensure adequate access to education and training services. Consultations 45. During the consultations the Ministry of Labor made presentations on the Seguro program to members o f the Indigenous Participation Council of INAI, and to the communities of Diaguita, Calchaquis and Lules in the province of Tucuman, as well as Toba and Mocovis Communities in Chaco. These presentations aimed at providing 109 information on Seguro activities, promoting the participation of Indigenous communities inits implementation, andreceiving suggestionson the IPPF andthe Project. Duringthe implementation of the ABP Project, the consultations and collaboration among the Ministry of Labor, INAI, the Indigenous Participation Council and Indigenous Provincial Institutions will continue with to ensure that IPPs are properly designed and implemented, with the aim of improving the efficiency and cultural appropriateness of the specific activities of the Project in order to increase the levels of schooling and skills withinIndigenous communities. 46. During a consultation organized by the Ministry with Indigenous communities in Tucuman, the representatives suggested that basic education and competency-based training courses should be organized in schools, and that these courses should be promoted through the radio. They requested technical assistance to help them identify training needs, including marketing of surplus agricultural products and use of machinery. These suggestionswill be incorporated inthe IPPs. 47. Given the nature of the Project, no negative impacts are expected. Nevertheless, indigenous population may have complaints regarding implementation. In order to prevent conflicts and resolve them appropriately, the normal complaint resolution channels of the Ministry of Labor will be used, operating through the provincial offices of the Secretariat of Employment (Offices of Employment and Professional Training). Generalguidelinesfor the social assessment 48. The Social Assessment on Indigenous Populations which each identifiedprovince or municipality would carry out according to Annex A of the OP 4.10, will contain the following: Demographic characteristics: age, sex, urbadrural, gender, migration. Educational and occupational characteristics, includingpeople that could be beneficiary of Seguro Grants. General guidelinesfor thepreparation of Indigenous PeoplesPlans (IPPs) 49. The preparation of the provincial or municipal plans will incorporate specific cultural appropriate strategies of promotion and communication adequate for Indigenous communities in order to guarantee their full understanding of the project. In particular, the following is envisaged: (a) the use of existing material in the original language; (ii) training of local agents to register participants in these communities; (iii)promotion and communication campaigns; (iv) mechanisms to provide information and respond to complaints, at the national as well as the provincial level; (v) training for tutors to work with the participants from these communities; and (vi) a description of the specific modality that would be used to offer these services in each Indigenous community. The provincial or municipal plans could include as well activities that the province or municipality develop in cooperation with its indigenous communities, to improve the quality and access to basic education services and work experience and training opportunities. 110 * 50. The provinces or municipalities where the cultural appropriate specific activities take place will have the primary responsibility for preparation and implementation of the IPPs, taking advantage of their experience in responding to needs and demands of indigenous population These entities will be responsible for financing the activities included in the IPPs, with support from MTESS when necessary and according to specific bilateral agreements. MTESS, with support from Bank staff as necessary, will participate and monitor the implementation of the IPPs. This monitoring and supervision strategy will ensure the implementation of an appropriate intercultural approach for indigenous communities. Financial resources, when necessary, will be provided by the MTESS. The preparation and implementation of the IPPs by the Government (including the necessary inter institutional agreements), satisfactory to the Bank, are considered eligibility criteria of Seguro Grantsto residents of those provinces or municipalities. 5 1. These mechanisms will ensure the implementation of an appropriate intercultural approach for indigenous populations. In addition, the Technical Project Coordination Unit of Seguro in the Ministry of Labor, as well as Bank staff, will monitor the implementation of the IPPs during Project implementation. 111 Annex 11: ProjectPreparationand Supervision ARGENTINA: Basic ProtectionProject ~~~ ~ ~ ~ ~~ Planned Actual PCNreview 01/30/2009 01/30/2009 Initial PID to PIC 02/03/2009 03/16/2009 Initial ISDS to PIC 02/03/2009 03/13/2009 Appraisal 03/16/2009 03/16/2009 Negotiations 03/16/2009 03/20/2009 Board/RVP approval 06/09/2009 Planneddate of effectiveness 06/16/2009 Planneddate of mid-termreview N/A Plannedclosing date 09/30/2011 Key institutions responsible for preparation of the project: Ministry of Labor Bank staff and consultants who worked on the project included: Name Title Unit Rafael Rofman Lead Social Protection LCSHS Specialist Helena Ribe Sector Manager LCSHS Hermann von Gersdorff Sector Leader LCSHD Dena Ringold Senior Economist LCSHS Juan MartinMoreno Social ProtectionEconomist LCSHS Vanina Camporeale Operations Officer LCSHS Marcela Salvador Social Protection Consultant LCSHS Carla Bonahora Junior Professional LCSHD Associate Santiago Scialabba Program Assistant LCSHD MartaMolares-Halberg Lead Counsel LEGLA Ana Grofsmacht Procurement Specialist LCSPT Alejandro Solanot Financial Management LCSFM Specialist Ricardo Schusterman Consultant on Social Issues LCSSO PalomaAnos Casero Country Economist LCSPE Isabel Tomadin Social Development LCSHS Bank funds expendedto date on project preparation: US$104,829.18 1. Bank resources: US$242,000 2. Trust funds: Not applicable 3. Total: US$242,000 Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$135,170.82 2. Estimatedannual supervision cost: TBC 112 Annex 12: Documentsinthe ProjectFile ARGENTINA: Basic ProtectionProject 1. Argentina Heads o f Household Program, Project Appraisal Document (July 2002). 2. Argentina Heads o f Household Transition Project, Project Appraisal Document (February 2006). 3, Argentina Lifelong Learning Project, Project Appraisal Document (May 2007). 4. Control and Accountability Mechanisms inConditional Cash Transfers Programs, A Review of Programs inLatinAmerica andthe Caribbean, World Bank (March 2007). 5. Los Programas Sociales en Argentina hacia el Bicentenario, Visiones y Perspectivas, World Bank (October 2008). 6. Argentina: Income Support Policies toward the Bicentennial, World Bank (December 2008). 7. Atender necesidades, crear oportunidades o garantizar derechos. Visiones sobre la politica social, by Alejandro Bonvecchi and Catalina Smulovitz (December 2007). 8. Percepciones sobre 10s Planes Sociales en Argentina, by Guillermo Cruces, Helena Rovner and Agustina Schijman (February 2008). 9. Condiciones para politicas sociales subnacionales autonomas en paises federales, by Alejandro Bonvecchi (May 2008). 10. Marco de Planzjkacidnpara Pueblos Indigenas. Ministry o f Economy and Public Finance (March 2009) 113 Annex 13: Statementof Loansand Credits ARGENTINA: Basic ProtectionProject Differencebetween expected and actual Original Amount in US$Millions disbursements ~~ Project ID FY Purpose IBRD IDA SF GEF Cancel Undisb Orig Frm Rev'd PI01171 2009 AR SOC&FISC NTL ID SYS 11 20.00 0.00 0.00 0.00 0.00 20.00 0.00 0.00 P106684 2009 AR 2nd Prov.Agric Dev 300.00 0.00 0.00 0.00 0.00 300.00 0.00 0.00 P106752 2009 AR Unleashing Productive Innovation 150.00 0.00 0.00 0.00 0.00 1so.00 0.00 0.00 PIIO462 2009 AR Mining Environmental Restoration 30.00 0.00 0.00 0.00 0.00 30.00 0.00 0.00 Project PI00806 2008 AR SustainableNaturalRes Mgt 60.00 0.00 0.00 0.00 0.00 60.00 0.00 0.00 PO95569 2007 AR APLZ National Highway Asset Mgt 400.00 0.00 0.00 0.00 0.00 400.00 0.00 0.00 PO90993 2007 AR-Essential Public HealthFunctions 220.00 0.00 0.00 0.00 0.00 151.82 23.29 0.00 PO95515 2007 AR (APL2) Prov. Maternal-ChildHealth 300.00 0.00 0.00 0.00 0.00 257.79 68.79 0.00 PO95514 2007 AR LifelongLearningProject 200.00 0.00 0.00 0.00 0.00 193.00 18.00 0.00 PO99051 2007 AR- SANTA FE ROAD Infrastructure 126.70 0.00 0.00 0.00 0.00 108.50 61.80 29.80 PO99585 2007 AR-Cordoba-Road Infrastructure 75.00 0.00 0.00 0.00 0.00 48.45 43.12 0.00 P101170 2007 AR 2nd State Modernization 20.00 0.00 0.00 0.00 0.00 16.44 4.34 0.00 P105288 2007 AR APL2 Buenos Aires Infrastructure 270.00 0.00 0.00 0.00 0.00 270.00 23,OO 0.00 PO55483 2006 AR-Heads of HouseholdTransitionProject 350.00 0.00 0.00 0.00 0.00 45.06 45.06 0.00 PO60484 2006 AR Basic Municipal Services Project 110.00 0.00 0.00 0.00 0.00 98.42 27.16 0.00 PO70448 2006 AR SubnationalGov Public Sec 40.00 0.00 0.00 0.00 0.00 37.66 23.23 0.00 Modernization PO70963 2006 AR RuralEducationImprovement Project 150.00 0.00 0.00 0.00 0.00 129.33 60.46 -20.52 PO93491 2006 AR (APL2) Urban FloodPrev..& Drainage 70.00 0.00 0.00 0.00 0.00 69.53 69.70 0.00 PO92836 2006 AR Inst.Strengthening- ANSES I1TA 25.00 0.00 0.00 0.00 0.00 20.28 11.28 0.00 PO89926 2006 AR Solid Waste ManagementProject 40.00 0.00 0.00 0.00 0.00 38.38 17.78 0.00 PO70628 2005 AR-Provincial Road InfrastructureProject 150.00 0.00 0.00 0.00 0.00 122.66 95.66 0.00 PO88032 2005 AR(CRL1)Buenos Aires Infrastr 200.00 0.00 0.00 0.00 0.00 66.27 61.59 0.00 SDP(1APL) PO88220 2005 AR (APL1)UrbanFloodPrevention& 130.00 0.00 0.00 0.00 0.00 121.90 102.06 0.00 Drainage PO71025 2004 AR-Provincial Maternal-ChildHealthInv 135.80 0.00 0.00 0.00 0.00 32.39 20.27 0.00 Loan PO88153 2004 AR NationalHighway Asset Management 200.00 0.00 0.00 0.00 0.00 14.77 14.77 0.00 PO06043 1999 AR RENEW.ENERGYR.MKTS 80.00 0.00 0.00 0.00 0.00 58.28 8.28 6.86 PO06041 1998 AR SMALL FARMER DV. 120.00 0.00 0.00 0.00 0.00 45.00 0.00 0.00 PO39584 1997 AR B.A.URB.TSP 300.00 0.00 0.00 0.00 0.00 99.21 -0.79 -0.79 PO06010 1997 AR PROV AG DEVT 1 162.00 0.00 0.00 0.00 0.00 26.27 -10.73 -10.73 Total: 4,434.50 0.00 0.00 0.00 0.00 3,031.41 788.12 4.62 114 ARGENTINA STATEMENT OF IFC's Heldand DisbursedPortfolio InMillions ofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2000 ASF 3.76 0.00 0.00 3.85 3.76 0.00 0.00 3.85 1998 AUTCL 4.28 0.00 0.00 0.00 4.28 0.00 0.00 0.00 2004 Aceitera General 50.00 0.00 20.00 30.00 50.00 0.00 20.00 30.00 2006 Arcor 70.00 0.00 0.00 210.00 70.00 0.00 0.00 210.00 2000 BACS 0.00 6.25 0.00 0.00 0.00 6.25 0.00 0.00 2006 BACS 50.00 0.00 0.00 0.00 13.25 0.00 0.00 0.00 1999 BancoGalicia 57.79 0.00 0.00 40.91 57.79 0.00 0.00 40.91 2005 BancoGalicia 40.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1997 Bunge-Ceval 0.00 0.00 5.00 0.00 0.00 0.00 5.00 0.00 2006 CAPSA 50.00 0.00 0.00 20.00 50.00 0.00 0.00 20.00 1995 CEPA 3.00 0.00 0.00 1.20 3.00 0.00 0.00 1.20 1998 F.V. S A 1.50 0.00 4.00 0.00 1.50 0.00 4.00 0.00 Grupo Galicia 0.00 3.06 0.00 0.00 0.00 3.06 0.00 0.00 1998 HospitalPrivado 8.40 0.00 0.00 0.00 8.40 0.00 0.00 0.00 1992 Huantraico 0.00 27.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Jumbo Argentina 0.00 39.12 0.00 0.00 0.00 39.12 0.00 0.00 LD Manufacturing 0.00 0.00 5.00 0.00 0.00 0.00 5.00 0.00 Milkaut 0.00 1.23 0.00 0.00 0.00 0.00 0.00 0.00 1997 Milkaut 5.33 0.00 9.44 1.44 5.33 0.00 9.44 1.44 1993 Molinos 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00 1994 Molinos 0.00 0.57 0.00 0.00 0.00 0.57 0.00 0.00 1996 NeuquenBasin 0.00 26.40 0.00 0.00 0.00 0.00 0.00 0.00 1999 NeuquenBasin 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 Noble Argentina 18.00 0.00 0.00 18.00 15.00 0.00 0.00 15.00 2005 PAE - Argentine 105.50 0.00 15.00 135.00 103.53 0.00 15.00 135.00 1998 Patagonia 1.76 0.00 1.oo 0.00 1.76 0.00 1.oo 0.00 1998 PatagoniaFund 0.00 8.54 0.00 0.00 0.00 1.65 0.00 0.00 1999 S A San Miguel 2.76 0.00 0.00 0.00 2.76 0.00 0.00 0.00 2005 S A San Miguel 20.62 0.00 0.00 10.00 17.29 0.00 0.00 8.33 1995 SanCor 8.70 0.00 19.89 0.00 8.70 0.00 19.89 0.00 Socma 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00 1995 Socma 0.94 0.00 0.00 15.00 0.94 0.00 0.00 15.00 1997 T61 3.33 0.00 5.00 3.75 3.33 0.00 5.00 3.75 1997 Terminal 6 3.33 0.00 0.00 1.63 3.33 0.00 0.00 1.63 1995 Terminales Port. 0.50 0.00 0.00 0.00 0.50 0.00 0.00 0.00 2000 Tower Fund 0.00 0.85 0.00 0.00 0.00 0.00 0.00 0.00 1995 Tower Fund Mgr 0.00 0.05 0.00 0.00 0.00 0.05 0.00 0.00 1996 Transconor 4.20 0.00 0.00 157.58 4.20 0.00 0.00 157.58 2001 USAL 9.27 0.00 0.00 0.00 7.27 0.00 0.00 0.00 2005 Vicentin 20.00 0.00 15.00 0.00 0.00 0.00 15.00 0.00 1993 Yacylec 0.00 2.52 0.00 0.00 0.00 2.52 0.00 0.00 Total portfolio: 549.97 122.59 99.33 648.36 447.92 55.22 99.33 643.69 115 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2001 ITBA 0.01 0.00 0.00 0.00 2001 Gasnor 0.02 0.00 0.00 0.02 2006 Arcor Swap 0.00 0.00 0.00 0.00 2004 BancoRio TFF 0.02 0.00 0.00 0.05 2005 VicentinExp. 0.00 0.00 0.00 0.05 Total pendingcommitment: 0.05 0.00 0.00 0.12 116 Annex 14: Country at a Glance ARGENTINA: BasicProtectionProject Argentina at a glance W27D9 Latin Upper Key Development Indicators America middle Argenlna &Carib. illcome Age distributiar. 2007 (20071 Male Female Population.mid-year (millions) 39.5 563 823 75-19 Surface area (thousandsq. km) 2,780 20,421 41,497 Population grodh (%) 0.9 1.2 0.6 6044 Uban population (%oftotal pgxllation) 92 78 75 45d8 GNI (Wlasmethod. US$billions) 238.9 3,118 5.750 3044 GNI per capita (Atlas methal, US$) 6,050 5,540 6.987 1618 GNI per capita(PPP,intemationd $) 12,990 9,320 11.868 0 4 GDP gum(%) 8.7 5.7 5.8 10 5 0 5 10 GDP percapita QrChyth(%) 7.6 4.5 5.1 percent (m& recentestimate,2 0 ~ 2 0 0 7 ) Povertyheadcountratioat $12 5 a day (PPP,96) 8 Povertyheadcountratioat $Z.OOaday(PPP,%) 18 Jnder-6 mottalityrate (per 1,000) Lfe ewectwcy at birth (yean) 75 73 70 Infant moital%y(per1,000 live births) 14 22 22 CMldmalnutrilon (% of childrenunder 5) 2 5 Pddt literacy, male(%of ages 15 andolder) 97 91 94 Pdult literacy, female (% of ages 15and older) 97 89 92 Grossprimaryenrollment, male(%ofagegmup) 113 120 112 Gross primaryerrollment, female (%ofage NOW) 112 118 109 Access lo ~nimp-ovedwater swce (%of population) 96 91 95 Pccess to improveds W a l o n facilities (W of population) 91 78 83 OArgentina ULabn America d h e Canbbem Net Aid Flom 1980 1940 2000 2007 ' (US$ mi//ions) Net ODA and ci3cid aid 19 169 53 114 Orowth of GDPand GDPper capita (%) Top 3donors (in2 W ) : HdY 1 82 -12 27 I5- EuropeanCmmission 0 2 10 25 France 1 6 8 16 Ad (%of GNI) 0.0 0.1 0.0 0.1 Ad per capita(US$) 1 5 1 3 Long-Term Economic Trends Consuner prices(arnud 36 change) 100.8 2314.0 -0.7 8.6 GDP implicitdeflalor (annual% c h w e ) 90.8 2.076.8 1.0 14.1 -0-GDP -GDP per capita Exchangerate (annualaverage, local per US$) 0.0 0.5 1.0 3.1 Terms of trade index (2OW 100) 85 100 114 198WO 1990-2UOO 200047 (averaw annud growth%) Population micLyear(millions) 28.1 32.6 36.9 39.5 1.5 1.2 1.0 GDP (US$miiiions) 76,962 141,352 284.204 262,331 -0.7 4.3 4.7 (% of GDP) Agriculkire 6.4 8.1 5.0 8.4 0 7 3 5 3 0 Industry 41.2 36.0 27.6 35.6 -1 3 3 8 53 MmufactUlng 29.5 26.8 17.5 22.3 -0 8 2 7 5 0 Services 52.4 55.9 67.4 56.0 0 0 4 5 2 4 Householdfinal consumptionexpendhre 63 0 77.1 70.7 53.6 Gened gob4final msumption expendibm 1 1 0 3.1 13.8 12.4 22 72 21 23 Grosscapital formation 25.3 14.0 16.2 23.5 -5 2 7 4 9 2 Exportsof goods and services 5.1 10.4 10.9 24.7 3 8 8 7 7 0 Imports of @xdsand swices 6.5 4.6 11.5 19.2 -5 8 156 5 0 Gross savings 22.9 13.4 13.0 26.8 Note: Figrres in italics are for yearsolher than those specified 2007 data are preliminary. ..indicates data are mt awilable. a. Ad data are lor 2006. DevelopmentEconomics,Development Data Group(DECDG). 117 Argentina ~ ~~ Balance of Payments and Trade 2000 2007 Governanwindicaton,2000 and2007 (US$milhons) Total merchandiseexwlts (bb) 26,341 52,238 Total merchandiseimpats (cf) 25,281 43,700 Voice and accwntability Net tade in goodsa d services -1,832 12,937 Polidcal stability Wakers'remlttances and compensationof empiopes (recapts) 86 M)2 Regulatory quality Current account balance -8,981 6,246 Rule of IBW as a % of GDP -3.2 2.4 Control of curupdon Reserves including @d 25.147 14,153 0 25 50 75 I00 Central Government Finance m2w7 Country's prcenhle rank (0-100) 02WO hrghv !duesm#y brier miner (%of GDP) Current revenue(indudinggrants) 19.4 24.2 Sowm KauhnannXraayMasbmi W u I Bank Tax revenue 11.3 17.3 Current expenditure 20.9 19.9 Technology and Infrastructure 2000 2007 Overdi surpiuskiefcit -2.4 1.6 Pavedroads(% of total) 29.4 30 0 Highest marginaltax rate (Oh) Fixedline and mobilephone lndividual 35 35 subscribers (per 1,WOpeople) 39 126 Caprate 35 35 Hight%hndogyeq)ats (% d manufacturedexports) 9.1 6 8 External Debt and Resource Flows Environmenl (US$milhorn) Total debt Wlstandlngand disbursed 144,126 122,190 Agriculturalland (%of landarea) 47 47 Total debt secvice 26,966 18,994 F a s t area (%of land area) 12.3 12 I Debt relief (HiPC MDRO - - Nalonaliyprotected areas (%of land area) 6 4 Total debt (% dGDP) 50.7 57.0 Freshwaterresources per capita (cu.meters) 7,123 Total debt sewice(% of expats) 69.8 32.0 Freshwaterwithdmal (%of intmal resources) 10.6 Fweigndired invesbnent (netinflows) 10,418 4,840 C02 missionsper capita (mt) 3.7 3 7 Poltblio equity (netinflows) -3,227 662 GDP per unit of energyuse (2005PPP$ per kg of oilequivalent) 6.1 6 6 Cornwsition of total external debt 2006 Energyusepercapita(kg doil equivalenq 1,679 1,644 Shon4erm 35 030 2007 (US$ rnillfons) IBRD Total debtoutstandingand disbursed 8,769 5,674 Disbursements 1,019 505 Pnnapalrepaynents 538 1,037 Interestpayments 701 350 JSS millions IDA Total debt outstandingand disbursed 0 0 Disbursements 0 0 Private Secior Development 2000 2008 Total debt service 0 0 Timerequiredb stalt a business (days) 32 IFC (fiscalyear) Cost bstartabusiness(%dGNIpercapita) 9.0 Total disbursed and outstcnding portfolio 2,305 1,078 Timerewired b wister wowrtv (daw) --- 51 ofwhidr i F C m a c c a n t 1,196 628 Disbursementsf a IFCownaccount 252 93 Rankedas a major mnstraintto business 2000 2007 Patfdio sales, pfepaynents and (56 dmmagers suweyed who agreed) repaynents for iFC ownaccount 74 138 Emnomic and regulatorypdicy uncertdnty .. 16.5 Accesstdcost dfinandng .. 15.7 MiGA Gross exwsure 491 38 Sock marketcapiklization (% dGDP) 56.4 33.0 Newguarantees 127 0 Bank capital lo asset ratio (%) .. 13.7 Note: Figures lnltalicsarefwyearsoherthanthosespacified. 2007dataarepfeiiminary Y27B9 .. indicatesdata are not avdiabie. -indicates observationisnot applicable. DevelopmentEconomics,Development DataG w p (DECDG) 118 MiHennium Development Goals Argentina Withselected targets to achieve between 1990and 2015 (estimateclosestto date shorn, +/- 2 years) Goal 1:halve the ratesfor extreme poverty and malnutrition lee0 1995 2000 2007 Povertyheadcountratio at $125 a day (PPP, %of population) Povertyheadcountratioat nalonal povertyline(% ofpopuialion) Share d i m m e or consumplionto the poorestqunitiie(Oh) 4.6 3.9 3.2 3.1 Prevalerceof malnutrition(%of childrenunder5) 2.3 Goal 2: ensurethat childrenam abletocomplete primaryschoollng Primaryschodenrollment (net,%) 94 99 99 Rimarycmplelonrate(% of relevantage group) 98 99 97 Secondsy school enrollment (gross,%) 72 97 54 Youth literacyrate (%of people ages 15-24) 98 99 Goal 3: eliminategender dsparityin education andempower wmen Ratioof girls to boys in piimary and secondaryeducalon(%) 103 1W Wanen employedin the nonagriarlturaisector (% d nonagriculiurdemploynent) 37 40 43 45 Raportionof seatsheldbywmen in nationalpwlianent (56) 6 25 28 35 Goal4: reduce under4 mortality by twothirds Unda--5rnortalityrate(per1,wO) 29 23 19 16 Infant morkiityrate (per1 ,wOlive birhs) 25 20 17 14 Measleslmmunizadon(proportionof one-war olds immunized.%) 93 69 91 97 Goal 5: reducematernal mortality bythree-fourths Matemalmortality ratio(modeledeslimab,per 100,WOlivebirths) 77 Births attendedby skilledhedth staff(% of total) 96 98 99 Conraceplve prevalence (% of women ages 1549) Goal6: halt andbegin to reversethe spread of HlVlAlDSand other majordiseases Prevalenceof HIV(% of populationages 1549) 0.5 0.5 Incidenceof tuberculosis (per lW,oOOpeople) 73 60 49 39 TuberculosiscasesdetectedunderDOTS(56) 4 31 71 Goal7: halvethe propottbnof peoplewithout sustalnable accessto bask needs Access t o w improvedwater source (% of population) 94 85 96 96 kcessto improvedsaniktion facilities (% dpopulalon) 81 85 89 91 Forestarea(%of total land area) 12.9 12.3 12.1 Nationalllyprdectedareas(%oftdal landarea) 6.4 C02 missions (metric bns per capita) 3.4 3.4 3.7 3.7 GDP per unitd energy use (constant2OC5 PPP $per kg of oil equivalent) 5.3 6.1 6.1 6.6 Goal8: develop a Qbbalparblership f a development Telephone mainlines (per 100people) 9.3 16.4 21.4 24.0 Mobilephonesubscribers(per 1W people) 0.o 1.2 17.6 102.3 lntemetusers (per 100people) 0.o 0.1 7.0 23.6 ::r Personalcomputers (per 1W people) 0.7 3.6 6.9 9.0 I Education indicators (%) Measks immunization(% of ?-yearOUS) ICT indicators (per 1,000people) lIOO1 150 25 2000 2002 2004 2006 -+-Primary net enrollment rabo +Ratio of girlsto boys in primary 8 OArgentlna OLabn Amenca h me Caribbean secondary education Note: Figures in italicsare for yearsoher than those specified...indicatesdataare not available. 3/27/08 DevelopmentEconomics,Development DataGroup(DECDG). 119 MAP SECTION IBRD 33362R 70°W BOLIVIA To Tarija 60°W 50°W JUJUYJUJUY Pilcomayo To PARAGUAY Calama San Salvador De Jujuy To S A L TA Salta FORMOSA San Pedro CHILE s To Cascavel eTUCUMÁN Salado CHACOCHACO Formosa To San Miguel De Tucumán Paraguay Paraná Copiapó d B R A Z I L CATAMARCA SANTIAGO Resistencia Posadas Santiago Del Estero Corrientes n MISIONES DEL ESTERO Uruguay Catamarca CORRIENTES To To A La Rioja Santa Rosa La Serena LA S A N TA Laguna To F E Santa Maria 30°S Mar Chiquita RIOJA SAN Cordoba To JUAN San Juan Santa Fe Paraná Paraná Artigas 30°S Cerro CORDOBA CORDOBA To PACIFIC Aconcagua E N T R E Tacuarembó (6960 m) Mendoza R Í O S OCEAN To San Luis Rosario Valparaíso Desaguadero s To URUGUAY Montevideo MENDOZA MENDOZA SAN LUIS a BUENOS AIRES p La Plata To Talca m Salad a B U E N O S 0 100 200 300 400 500 Kilometers Santa Rosa Colorado o A I R E S L A P 0 100 200 300 Miles PA M PA Mar del Plata To Los Ángeles NEUQUEN Bahía Blanca Neuquén A Negro RIO NEGRO RIO NEGRO 40°S n To Viedma Puerto Montt d 40°S e Chubut C H U B U T s Rawson ATLANTIC ARGENTINA a OCEAN i Chico To n Coihaique Comodoro Rivadavia o CHILE Deseado g S A N TA aC R U Z t aChica ARGENTINA FALKLAND ISLANDS (ISLAS MALVINAS) P A DISPUTE CONCERNING SOVEREIGNTY OVER THE ISLANDS EXISTS BETWEEN ARGENTINA WHICH CLAIMS 50°S 50°S THIS SOVEREIGNTY AND THE U.K. WHICH ADMINISTERS SELECTED CITIES AND TOWNS THE ISLANDS. Río Gallegos PROVINCE CAPITALS Stanley NATIONAL CAPITAL RIVERS TIERRA TIERRA MAIN ROADS DEL FUEGO DEL FUEGO This map was produced by the Map Design Unit of The World Bank. RAILROADS The boundaries, colors, denominations and any other information Ushuaia shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any PROVINCE BOUNDARIES endorsement or acceptance of such boundaries. INTERNATIONAL BOUNDARIES 80°W 70°W 60°W 50°W AUGUST 2008