The World Bank Social Safety Net Project (P167416) REPORT NO.: RES40807 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SOCIAL SAFETY NET PROJECT APPROVED ON APRIL 3, 2019 TO REPUBLIC OF ECUADOR MARCH 2020 SOCIAL PROTECTION & JOBS LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez Country Director: Marianne Fay Regional Director: Luis Benveniste Practice Manager/Manager: Pablo Gottret Task Team Leader(s): Nelson Gutierrez The World Bank Social Safety Net Project (P167416) ABBREVIATIONS AND ACRONYMS CD Country Director DLI Disbursement Link Indicators IBRD International Bank for Reconstruction and Development MEF Ministry of Economy and Finance (Ministry of Economy and Finance) MIES Ministry of Economic and Social Inclusion (Ministerio de Inclusión Económica y Social) PDO Project Development Objective PIU Project Implementing Unit URS Social Registry Unit (Unidad del Registro Social) VAT Value Added Tax The World Bank Social Safety Net Project (P167416) BASIC DATA Product Information Project ID Financing Instrument P167416 Investment Project Financing Environmental and Social Risk Classification (ESRC) Moderate Approval Date Current Closing Date 03-Apr-2019 30-Dec-2022 Organizations Borrower Responsible Agency Ministry of Social Inclusion and Equity (MIES),Unidad del Republic of Ecuador Registro Social Project Development Objective (PDO) Original PDO The Project development objective is to improve the equity, integration and sustainability of selected social safety net programs. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-89460 03-Apr-2019 22-Jul-2019 06-Aug-2019 30-Dec-2022 350.00 42.49 307.51 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Social Safety Net Project (P167416) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status: 1. Project implementation progress is satisfactory. The Project was approved on April 2019, signed on July 2019 and became effective on August 2019. The Project design includes two implementing units (PIUs), the Ministry of Economic and Social Inclusion (MIES) and the Social Registry Unit (URS). Activities are being implemented by both PIUs on a timely manner, although there has been a significant staff turnover in both institutions. In November 2019, an implementation support visit took place in order to discuss critical implementation issues including: (i) the official release of the Social Registry Database (by the Social Registry Unit (URS); (ii) revision of disbursement projections; and (iii) progress towards launching economic inclusion strategies. As of today, the Social Registry Database has not been released yet and is expected to be ready by June 2020. Additionally, the Bank team is still providing support to MIES on the design of the economic inclusion strategies. To date, the URS has requested three disbursements for a total amount of US$ 35 million. Two reimbursements were authorized on September 24th, 2019 and disbursed on September 26 and 30, 2019. Additionally, the URS requested an advance of $ 10 million for a partial achievement of DLI 1 (Executive Decree creating the institutional framework to operate the Social Registry approved) that was approved on September 20th, 2019 and disbursed on October 10th, 2019. MIES also achieved and disbursed US$ 6 million for DLI 3 (Operational Manual of Mision Ternura approved) on February 21st, 2020 and requested an additional disbursement of US$ 683,000, to cover expenses under the Technical Assistance component, on March 10th, 2020. B. Rationale for Restructuring: 1. The Government of Ecuador (GoE) is facing a difficult economic situation due to several factors, most importantly the dramatic fall in oil prices. In an effort to optimize the use of financial resources and avoid further implementation delays due to the lack of liquidity and fiscal resources to finance VAT fees, the Government of Ecuador requested the amendment of their full portfolio of Loan Agreements, in order to allow for the financing of VAT with loan proceeds (Oficio Nro.MEF-SFP-2020-0171-O, dated February 18, 2020). Loan No. Project Name 8591 Risk Mitigation and Emergency Recovery Project 8542 Supporting Education Reform in Targeted Circuits Project 8515 Sustainable Family Farming Modernization Project The World Bank Social Safety Net Project (P167416) 8946 Social Safety Net Project 8667 Transformation of the Tertiary Technical and Technological Institutes Project 2. The involved World Bank Project Managers have worked with the respective implementation units and the Ministry of Economy and Finance to define the changes in each project’s scope associated with the said request. Consequently, project documents and implementation plans have been updated accordingly. 3. An umbrella amendment to the Loan Agreements has been prepared and is attached to this Restructuring Paper. The proposed effectiveness date for this restructuring will be January 2nd, 2020, which is the date when the Government of Ecuador issued the Executive Decree 001 enabling the VAT to be financed with resources from loans signed with multilaterals. II. DESCRIPTION OF PROPOSED CHANGES A. Inclusion of VAT within the Expenditure to be financed Originally, the loan agreement stated that VAT should be paid with resources from the Government of Ecuador. However, as per requested, VAT will be financed with resources from the loan and the Loan Agreement will be amended to reflect this change. This restructuring is requesting approval to include VAT as an eligible expenditure in the Loan Agreement. TE TABLE Currently Category Amount of the Loan Percentage of Expenditures to be Allocated financed (expressed in USD) (exclusive of Taxes) (1) Eligible Expenditure Programs 100% of the amount of the Loan under Part 1.1. of the Project 61,200,000 allocated to each DLI, subject to the provisions of Part B of this Section (2) Eligible Expenditure Programs 100% of the amount of the Loan under Part 1.2. of the Project 137,680,000 allocated to each DLI, subject to the provisions of Part B of this Section (3) Eligible Expenditure Programs 100% of the amount of the Loan under Part 1.3. of the Project 129,320,000 allocated to each DLI, subject to the provisions of Part B of this Section (4) Goods, non-consulting services, consulting services and 17,050,000 100% Operating Costs under Part 2 for MIES The World Bank Social Safety Net Project (P167416) (5) Goods, non-consulting services, consulting services and 4,750,000 100% Operating Costs under Part 2 for SENPLADES TOTAL AMOUNT 350,000,000 Proposed Category Amount of the Loan Percentage of Expenditures to be Allocated financed (expressed in USD) (including VAT) (1) Eligible Expenditure Programs 100% of the amount of the Loan under Part 1.1. of the Project 61,200,000 allocated to each DLI, subject to the provisions of Part B of this Section (2) Eligible Expenditure Programs 100% of the amount of the Loan under Part 1.2. of the Project 137,680,000 allocated to each DLI, subject to the provisions of Part B of this Section (3) Eligible Expenditure Programs 100% of the amount of the Loan under Part 1.3. of the Project 129,320,000 allocated to each DLI, subject to the provisions of Part B of this Section (4) Goods, non-consulting services, consulting services and Operating 17,050,000 100% Costs under Part 2 for MIES (5) Goods, non-consulting services, consulting services and Operating 4,750,000 100% Costs under Part 2 for URS TOTAL AMOUNT 350,000,000 III. SUMMARY OF CHANGES Changed Not Changed Other Change(s) ✔ The World Bank Social Safety Net Project (P167416) Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) . The proposed change is that, in all categories, the VAT will be covered with resources from the Loan.