Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 47874-AR

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED L O A N

IN THE AMOUNT OF US$450 MILLION

TO THE

ARGENTINE REPUBLIC

FOR A

BASIC PROTECTION PROJECT

May 4,2009

Human Development Sector Management Unit 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 o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 4,2009)

AAA AAFF ADP AFIP

AFJP

AGN ANSES

APL BCRA CAS CCT CEDLAS

CFAA CIC CPI CPS CPyPE CQS CUT DA DDJJ

DNPOIC

DO EO EPH EPPS

Currency Unit = Argentine Peso AR$3.6965 = US$l

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

Analytical and Advisory Activities Asignaciones Familiares (Family Allowances) ANSES’ Persons Administration Database Administracidn Federal de Ingresos Pziblicos (Public Income Federal Administration) Administ+adora de Fondos de Jubilaciones y Pensiones (Private Pension Fund Manager) Auditoria General de la Nacidn (National Audit Agency) Administracidn Nacional de la Seguridad Social (National Administration o f Social Security) Adaptable Program Loan Banco Central de la Repziblica Argentina (Central Bank) Country Assistance Strategy Conditional Cash Transfer Centros de Estudios Distributivos y Laborales, Universidad Nacional de La Plata Country Financial Accountability Assessment Centro Integrador Comunitario (Community Integration Center) Consumer Price Index Country Partnership Strategy Coordination o f Especial Programs and Projects Selection Based on Consultant’s Qualifications Cuenta Unica del Tesoro (Single Treasury Account) Designated Account Declaraciones Juradas de 10s Empleadores (Employers’ Social Security reports) Direccidn Nacional de Proyectos con Organismos de Cre‘dito Internacional (National Directorate o f Projects with International Credit Organizations) Development Objective Employment Offices Encuesta Permanente de Hogares (Permanent Household Survey) Encuesta de Percepciones de Politicas Sociales (Perception o f Social Plans Survey)

.. 11

FAP FM FMR FMS FMSB GDP GOA HHT IADB IAU IBRD ICB ICR ICT IDA IF1 IFR INDEC

IP IPP IPPF ISDS ISR LAC LAF LCS M&E MEPF MIS MSD MTESS

NCB NGO NPA OECD O M OP PAD PAYG PCN PFM PID QBS QCBS

FOR OFFICIAL USE ONLY

Fiduciary Action Plan Financial Management Financial Monitoring Report Financial Management Specialist Financial Management Sector Board Gross Domestic Product Government o f Argentina Heads o f Household Transition Project Inter American Development Bank Internal Audit Unit International Bank for Reconstruction and Development International Competitive Bidding Implementation Completion Report Information and Communications Technology International Development Association International Financial Institutions Interim Financial Reports Instituto Nacional de Estadistica y Censos (National Institute o f Statistics and Census) Implementation Progress Indigenous Peoples Plan Indigenous Peoples Planning Framework Integrated Safeguards Data Sheet Implementation Status Report Latin America and the Caribbean Region Ley de Administracidn Financiera (Financial Management Law) Least Cost Selection Monitoring and Evaluation Ministry o f Economy and Public Finance Management Information System Ministry o f Social Development Ministerio de Trabajo, Empleo y Seguridad Social (Ministry o f Labor, Employment and Social Security) National Competitive Bidding Non-Governmental Organizations National Public Administration Organization for Economic Cooperation and Development Operational Manual Operational Policy Project Appraisal Document Pay As You Go Project Concept Note National Public Financial Management Project Information Document Quality Based Selection Quality Based Selection o f Consultants

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

SBD SEPA SIDIF SIGEN SIJP S I L SINTyS

SOE sss T A TGN TOR UEC UEPEX

UNDP UTDT

Standard Bidding Documents Procurement Plans Execution System Integrated Financial Management System Sindicatura General de la Nacidn (General Syndicate o f the Nation) Sistema Integrado de Jubilaciones y Pensiones (National Pension System) Specific Investment Loan Sistema de Informacidn Nacional Tributaria y Social (National System o f Tax and Social Identification) Statement o f Expenditures Single Source Selection Technical Assistance Tesoreria General de la Nacidn (National Treasury Office) Terms o f Reference Central Executing Unit Argentina Budget Execution Software for Multi-Lateral Lending Operations United Nations Development Program Universidad Torcuato D i Tella

Vice President: Pamela Cox Country Director: Pedro Alba

Sector Manager: Helena Ribe Task Team Leader: Rafael P. Rofman

iv

ARGENTINA Basic Protection Project

CONTENTS Page

A . STRATEGIC CONTEXT AND RATIONALE ..................................................................... 1 Country and sector issues .................................................................................................... 1 1.

2 . 3 .

Rationale for World Bank involvement ............................................................................... 7

Higher level objectives to which the project contributes .................................................... 9

B . PROJECT DESCRIPTION ................................................................................................... 10 1. Lending instrument ............................................................................................................ 10

Project development objective and key indicators ............................................................ 10

Project components ............................................................................................................ 11

Lessons learned and reflected in the project design .......................................................... 15

Alternatives considered and reasons for rejection ............................................................. 16

2 . 3 . 4 . 5 .

C . IMPLEMENTATION ............................................................................................................ 17 1 . 2 . 3 .

Partnership arrangements .................................................................................................. 17

Institutional and implementation arrangements ................................................................ 18

Monitoring and evaluation o f outcomes/results ................................................................ 19 4 . Sustainability ..................................................................................................................... 19

Critical risks and possible controversial aspects ............................................................... 20

Loadcredit conditions and covenants .............................................................................. -22 5.

6 . 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 o r Program Background .......................................................... 30

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................. 52

V

Annex 3: Results Framework and Monitoring ......................................................................... 53

Annex 4: Detailed Project Description ...................................................................................... 58

Annex 5: Project Costs ................................................................................................................ 65

Annex 6: Institutional and Implementation Arrangements .................................................... 66

Annex 7: Financial Management and Disbursement Arrangements ..................................... 71

Annex 8: Procurement Arrangements ....................................................................................... 82

Annex 9: Economic Analysis ...................................................................................................... 88

Annex 10: Social Assessment ...................................................................................................... 97

Annex 11: Project Preparation and Supervision .................................................................... 112

Annex 12: Documents in the Project File ................................................................................ 113

Annex 13: Statement of Loans and Credits ............................................................................. 114

Annex 14: Country at a Glance ................................................................................................ 117

Annex 15: Map IBRD 33362 ..................................................................................................... 120

vi

ARGENTINA

2Y lnnual hmulative

BASIC PROTECTION PROJECT

2009 2010 2011 2012 180.0 266.0 3.0 1 .o 180.0 446.0 449.0 450.0

PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSHD-DPT Date: May 4,2009 Country Director: Pedro Alba Sector ManagedDirector: Helena G. Ribe Project ID: P115 183 Lending Instrument: Specific Investment Loan

[XI Loan [ ]Credit [ 3 Grant [ ]Guarantee [ 3 Other:

Team Leader: Rafael Rofman Sectors: Other social services (1 00%) Themes: Social safety nets (P) Environmental screening category: C

For Loans/Credits/Others: 1,270.00 Total Bank financing (US$m.): 450.00 Proposed terms: Fixed-Spread Loan (FSL) in U S Dollars to be paid on each June 15 and December 15; beginning June 15,2014 and to be fully repaid on December 15,2038.

Borrower: Argentine Republic

Responsible Agency: Ministry Economy and Public Finance Hip6lito Yrigoyen 250 Buenos Aires Argentina (541 1) 4349-5515

Project implementation period: June 15, 2008 - September 30, 201 1 (including eligibility for retroactive financing)

v i i

Expected effectiveness date: June 15,2009 Expected closing date: September 30,201 1 Does the project depart from the CAS in content or other significant respects? Ref: PAD A.2. Does the project require any exceptions from Bank policies? Ref: PAD D. 7 Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7 Project development objective Ref: PAD B.3, and Technical Annex 3

[ ]Yes [XINO

[]Yes [XINO []Yes [XINO []Yes [XINO

[]Yes [XINO

[XIYes [ ] N o

The project development objective i s 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. Project description Ref: PAD B, and Technical Annex 4

The proposed Project would be financed by a US$450 mi l l ion 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., Technical Annex 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 fol lowing 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 disbursement procedures.

2. Auditing Special Requirements: The Borrower, through the MTESS and ANSES shall ensure that the annual audits o f the Project, carried out in accordance with terms o f 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.

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 in the jurisdiction o f a Province or Municipality where the IPPF applies, enter into an agreement with the respective Province and/or Municipality setting forth their respective obligations in the implementation o f the IPPF and IPPs.

4. Reporting Covenant: The Borrower shall monthly furnish to the Bank reports to verify the evolution o f Monitoring Indicators discussed in Annex 3 o f the PAD, including a report from ANSES on SUAF, a report from AFIP on the compensatory scheme o f Family Allowances and the monitoring reports for Seguro.

5. Disbursement Conditions: The Bank will disburse up to 20 percent o f 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 wi l l only be authorized when the Disbursement Indicators have reached the target levels indicated for the “first disbursement level” in the table included in Section B.2 o f the PAD. Disbursements for Grants after the loan disbursed US$270 million from the loan account for Components 1 and 2 wi l l 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 o f the PAD. There wi l l be no disbursement conditions for Component 3.

i x

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. Argentina faces a narrowing window o f opportunity in social protection, at a critical time. Following the most serious economic crisis in i t s history in 2001-02, the country mobilized an unprecedented effort to provide income support to the population in need. By early 2007 social indicators had recovered to pre-crisis levels with the resumption o f 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 o f the global economic crisis.

2. In this regard, the Government’s efforts to continue building a strong and inclusive safety net wi l l 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 i s s t i l l higher than the early 1990s levels, with a Gini coefficient o f 0.48-0.50 in 2008, and Argentina’s ranking in Latin America has deteriorated in this area. Unemployment has declined from the peak o f 20 percent in 2002, during the crisis, to below 10 percent in 2008. However, there are concerns that unemployment may rise as a result o f 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 o f 8-9 percent growth since the financial crisis o f 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 o f 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 i t s momentum until the second half o f 2008 when the global economic crisis began to affect more strongly Argentina. The conflict increased economic uncertainty which in turn led to a surge o f 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 o f financial sector stress resulted from the deepening o f the global financial crisis and the October announcement o f the nationalization o f the private pension funds, but stability has now returned after 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 o f 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 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 implemented a policy o f more controlled depreciation to contain financial volatility and inflationary pressures. Fiscal accounts are deteriorating although the government wi l l likely manage to keep fiscal primary surpluses if growth o f primary expenditures i s 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 i t s 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.

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 o f social inclusion has been clearly based on the labor market in recent years. After the introduction o f 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 in the contributory social security system. As o f late 2008, more than 4 million beneficiaries received pensions (up from less than 3 million in 2006). Family Allowances reach children o f 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 o f continuous contributions may apply). As o f mid 2008, the Unemployment Insurance program had nearly 100 thousand beneficiaries, or approximately 7 percent o f all unemployed workers.

6. Benefits under the Family Allowances program (Asignaciones Familiares - AAFF) reach nearly 30 percent o f households in Argentina. Because the program i s 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 o f the formal labor force. The program effect on poverty incidence i s significant: a recent World Bank report estimated that family allowances reduced poverty by slightly over 2 percentage points as o f 2006.’

7. Meanwhile, the non-contributory safety net programs have been shrinking since 2003. While Jefes was an effective program for mitigating the effects o f the 2001-02 crisis, i t was designed as an emergency program and was never intended to be part o f a longer-term social protection strategy. Beginning in 2005, the Government has been

“Argentina. Income Support towards the Bicentennial” Report 44 194-AR. I

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 201 l2 (as described in Figure 1). The number o f beneficiaries o f Jefes has declined to an estimated 500,000 beneficiaries from a peak o f 2 mi l l ion 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

- Income Support - Coverage in 2008:

0.6 million

Seguro

- Training and Job

- Income Support Services

- Income Support - Peak Coverage:

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 j ob opportunities. The Government’s goal i s to slowly transfer al l Jefes beneficiaries to one o f these programs, that are considered better managed and more effective than Jefes.

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 as job 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 l imited impact in Argentina so far. The latest available unemployment figure i s from the last quarter o f 2008, when i t 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 wel l over the average increase in salaries. While these figures indicate that the crisis has not hit Argentina’s workers yet, it is l ikely 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 if they occur.

1 1. Considering the current macroeconomic and social situation in Argentina, authorities have requested the Bank’s support in two areas o f the social protection sector: (i) enhancing the effectiveness o f social protection policies; and (ii) creating conditions 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 if and 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 protection policy includes other programs, the focus on these two programs i s justified 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 in these 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 and j o b placement services. The program i s the Government’s main instrument for assistance to the unemployed. I t

In particular, the traditional payment system for family allowances, through employers’ compensations, has been considered too open to fraud and leakage, since verification o f qualifying conditions was a responsibility o f the employers without participation o f the 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 j ob 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 mi l l ion (US$60 million), with close to 78,000 beneficiaries by December 2008. The program i s 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 in Seguro when their municipalities j o i n 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 al l expenditures in the program, providing monthly benefits to nearly five mi l l ion 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 i s 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 f rom 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 in recent years, following the experience o f other countries in the 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 o f using deductions from contributions by f i r m s , as this scheme i s considered to be more reliable, better protected from fraud or manipulation, and provides the administration with a system that can be used to 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 mi l l ion chi ld allowances each month by the end o f 2008. This spending represents approximately AR$3.9 billion, or US$1.1 bi l l ion a year. This program has grown rapidly in recent years, as the number o f chi ld benefits

There are some exceptions to these values, depending on income level and region o f residence. See Annex 4

I1 for a hll description o f 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 al l 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 i t s family allowances program to offer a near-universal income transfer scheme to support poor families, regardless o f 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 system to implement it.

21. A possible expansion o f family allowances to those currently excluded from the program has been a regular topic in social pol icy debates in Argentina. 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. In the 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. In the case o f 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.

The authorities’ goal i s to pay al l benefits corresponding to Law 24.714, that is, al l wage-earners in the

Unemployed workers receiving the formal UI system benefits may also receive family allowances, but

5

private sector. Civil servants will continue to receive benefits directly from their employers.

only 6-8 percent o f a l l unemployed are covered by the insurance. 6

6

23, Both Seguro and Family Allowances currently have efficient, transparent and accountable systems for transferring resources to beneficiaries. Seguro i s implemented by the MTESS and monitored by a Management Information System (MIS) that i s successfully used for the Heads o f Household program. The existing World Bank- financed projects have improved the system (see Annex 3). Transfer payments are monitored by the Banco Nacidn and overseen by Auditoria General de la Nacidn (AGN), the national audit agency. In the case o f Family Allowances, SUAF i s 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 in their 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 i s 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 o f Seguro, the program could eventually be opened up to beneficiaries outside o f 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 o f expansion in coverage would be required for any additional financing in or beyond this operation.

2. Rationale for World Bank involvement

26. This project builds on the World Bank’s support to the Government o f 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 o f promoting further social inclusion as one o f 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 wi l l 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 o f social protection systems and income transfer programs in particular.

27. The World Bank i s 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 i t s 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 o f workers.

28, Support for Jefes has included two projects: the f irst in 2002 during the crisis, and the second in 2006. The first project financed transfers for beneficiaries who participated in temporary employment programs, education, or training activities. The loan also supported the Government’s efforts to monitor and evaluate the program and enhance i t s transparency, including improvements in management, governance, and investment in information and communications systems.

29. Due to i t s rapid design and launch to respond to the crisis, Jefes had some initial weaknesses in terms o f i t s 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 o f 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. In its 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 o f the beneficiaries, including school completion and the combination o f training with transient employment projects, especially in construction, including work on the Community Integration Centers (CICs), a program promoted by the Ministry o f Social Development (Ministerio de Desarrollo Social, MDS).

3 1. In response to governance concerns, additional controls, particularly for Bank financing, were agreed during preparation o f 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 o f workfare compliance in the overall program, with Bank financing ranging between 19 and 23 percent o f total spending depending on 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 o f a lifelong learning system based on competencies for vulnerable adults with the objective o f improving the employability o f 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 (1 8-24) through training and internships.

33. This new project will continue this support for the Government’s transition strategy from Jefes. The number o f 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 f the 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 in Argentina.

34. The Bank also has an active program o f 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 o f 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. H i g h e r level objectives to which the project contributes

35. This operation will contribute to the goal o f strengthening and expanding the social protection system in Argentina. I t 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 o f 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 in the supported programs, the operation would contribute to advances in the higher level objectives for the broader social protection agenda in Argentina. In particular, 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 related to these programs;

b. Support the expansion o f the Seguro program (Employment Benefit and Training), aimed at increasing employability o f unemployed and informal sector workers through temporary cash support, training, and j o b placement services;

c. Support the Government’s strategy to reform the Family Allowances program that provides income transfers to fami l ies o f lower income formal

’ The reports (Report No. 36092-AR Informal Employment in Argentina: Towards Understanding I ts Causes and Consequences and Report No. 44194-AR Argentina- Income Support Policies towards the Bicentennial) can be found at www.worldbank.org/ar.

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sector workers, increasing transparency and accountability, and setting the operational pre-conditions for a possible expansion o f coverage; and

d. Enhance the capacity o f the Government to monitor poverty and social protection, through technical assistance for the design and implementation o f a national “Social Protection Survey” and the improvement o f analytical capacity.

B. PROJECT DESCRIPTION

1. Lending instrument

37. The proposed Project would be financed by a US$450 mi l l ion 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.

2. Project development objective and key indicators

38. The project development objective i s 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 f rom 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 o f participants involved in training activities (to measure the quality o f the program in terms 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 chi ld 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 in transparency and control schemes); (iii) the number o f f i r m s registered in SUAF; and (iv) the amounts claimed to ANSES by employers as reimbursements through the compensatory scheme.

40. As discussed in section C.6 o f this P A D 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

a. Average o f the monthly percentage of beneficiaries o f the SCE Program receiving Employment and Training Services o f the total number o f beneficiaries o f the SCE Program, during the 6 month period preceding the date in which the Disbursement Indicator i s measured.

b. Number o f beneficiaries registered in the SCE Program

c. Number o f Employment Offices authorized for delivery of Employment and Training Services through agreements signed between the Borrower, through the Ministry o f Labor, and the respective Municipality or Province.

d. Average o f the monthly percentage o f payments made through SUAF of the total payments made under the AF Program to salaried workers in the private sector during the 12 month period preceding the date in which the Disbursement Indicator i s measured.

Baseline (date)

~

23.5% (May 2008)

78500 (May 2008)

181 (Nov 2008)

58.7% (Nov 2008)

Targt First

Disbursement

24%

82,000

200

62.8%

Level Second

Disbursement

26%

100,000

230

67.4%

3. Project components

41. The project wi l l 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.

42. Components I and I1 wi l l provide financial support to two o f the social protection programs in Argentina with the highest current and potential impact on living conditions and human capital accumulation o f 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 in the future.

43. The third component wi l l provide technical assistance to improve monitoring capacity at the MTESS. For years, social policy designers and officials in Argentina have had serious limitations due to the lack o f complete, reliable data on some basic indicators. Most social indicators in Argentina are based on a household survey that i s collected in 30 urban centers across the country and no information on small urban centers or rural

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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 protection policies. Finally, accessibility o f microdata has been l imited 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 in the analysis and redesign o f social policies.

44. Specific activities to be supported under each o f the components would be as fo 11 0 w s :

Component 1: Employment Benejit and Training Program (Seguro de Capacitacio'n y Empleo - Estimated amount US$80 million)8.

45. This component will support the operation and scaling up o f Seguro during 2009. Seguro i s 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 in the 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 must be 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 j o i n the program at a Municipal Employment office incorporated to the Network o f Employment Services o f MTESS. In this agreement they commit to:

i. Accept j o b offers received through the Municipal Employment Office (MEO);

ii. Participate in interviews and j o b placement workshops organized by the MEO;

iii. Join training activities (both basic and professional) offered to them by the MEO;

For a more detailed discussion o f the program, see Annex 1. 8

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iv. Renounce to their participation in Jefes program;

e. Participants are excluded from the program if: i. They find a formal job;

ii. They received the benefit for two years, unless otherwise agreed by the Bank;

iii. They reject job offers without justification; and

iv. They fail to comply with the conditions set in their signed agreement,

f. Participants are excluded from receiving Grants under this Project if their benefits have been financed by the Jefes Transition Project.

48. Seguro i s an ongoing national program providing transfers and services to participants in many provinces and municipalities. During the preparation o f 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. In this regard, no Loan Proceeds will be used to finance Grants to participants residing in a Province or Municipality where an IPP i s required, until the IPP i s prepared and approved by the Bank.

49. As the program i s 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 necessary to finance the corresponding Grants. If eligibility 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$365 million)’.

50. This component wi l l finance Grants to eligible beneficiaries o f the Child Benefit o f the Family Allowances program under the direct payment scheme. Family Allowances provide a monthly transfer to formal salaried workers with family dependents. The Grants wi l l finance only child benefits, paid by the direct payment system SUAF, through transfers to beneficiaries’ bank accounts. As o f late 2008, ANSES transferred benefits corresponding to nearly 2.4 million children through 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 firm registered in SUAF;

b. Beneficiaries’ family information, including date o f birth and tax number identification for all children, i s registered in ANSES’ data system;

For a more detailed discussion o f the Family Allowances system, see Annex 1. 9

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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.

52. If salary i s between AR$ l00 and AR$2,400, benefits are AR$135 per chi ld per month. For salaries between AR$2,400 and AR$3,600, benefits are AR$102 per chi ld per month. For salaries between AR$3,600 and AR$4,800, benefits are AR$68. Also, benefits are increased for beneficiaries l iving in less advantaged regions.

53. Under the Program, the SUAF expansion strategy will be implemented by requiring newly registered employers to j o in 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 limited to exceptional cases.

Component 3: Technical Assistance for the Social Protection System. (Estimated amount US$5 million).

54. The technical assistance component will support capacity building within the MTESS, particularly in the area o f monitoring and evaluation o f social protection policies. While the Ministry has strengthened i t s 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 i t s 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) Design and application o f the 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 household members;

b. Access to and impact o f social protection programs, with focus on income transfers;

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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. Lessons learned and reflected in the project design

57. This program draws on World Bank experience in the design o f social protection programs in L A C and other regions, as wel l 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 P A D for Loan 7474-AR). Similarly, the Family Allowances component draws on existing experience with cash transfers in Argentina 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 o f the Jefes program in 2003 demonstrated the impressive capacity o f the Government o f Argentina to rapidly deploy an income transfer program during a crisis - with 2 mi l l ion 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 building additional 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 wel l 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) in the program.

6 1. 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

See For Protection and Promotion: The Design and Implementation of Effective Safety Nets, 2008. M. 10

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 al l national newspapers, as well as the principal papers in every 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 in place 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 in need, and which can be scaled up if necessary.

63. The Bank’s analytical work in recent years had a clear influence in the design o f this program. Analyses carried out in the 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 underlying rationale for Component 3 o f this operation.

64. Lessons learned have been incorporated in the design o f this project, as follows. First, to avoid repeating the past problems o f governance in Jefes, the project supports programs that have very clear financial f low 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 i t s support on strategic programs, targeted to the unemployed and children.

5. Alternatives considered and reasons for rejection

65. W h i l e other loan instruments were explored, a Specific Investment Loan (SIL) i s preferred for 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 al l 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 in two 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 mi l l ion households in the 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 i t s 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 in their target populations.

C. IMPLEMENTATION

1. Partnership arrangements

69. At this time there are no partnership arrangements envisaged for this operation. The Inter-American Development Bank (IADB) i s 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 in November 2008.

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2. Institutional and implementation arrangements

70. The National Directorate o f Projects with International Credit Organizations (DNPOIC) o f the Ministry o f Economy and Public Finance wi l l coordinate the implementation o f the project and wi l l act as the Bank counterpart for the project. The DNPOIC will have overall responsibility for achieving Project goals through the coordination o f activities with the specific Agencies responsible for the implementation o f Project’s components; MTESS, though the Secretary o f Employment (Component l), the National Social Security Administration - ANSES (Component 2), and the Undersecretary o f Labor Studies (Component 3). By taking advantage o f Argentina’s institutional and fiduciary framework, the proposed project would build on the existing organizational and management structures o f the MTESS and ANSES which are currently responsible for managing and implementing Seguro and Family Allowances, respectively.

7 1. 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 o f an O M o f the project, which would define roles, responsibilities, mechanisms, schedules, eligibility criteria o f Grants and Beneficiaries and accountability arrangements, necessary for implementation o f the project.

72. The DNPOIC will have overall responsibility for coordination with ANSES and MTESS and for the FM responsibilities o f the program comprising accounting and financial reporting, flow o f funds and external auditing arrangements.

73. ANSES as well as MTESS are part o f the National Public Administration, with no juridical personality separate from the Republic o f Argentina, an thus their expenditure‘ s execution processes are included in the Integrated Financial Management System (SIDIF). SIDIF wi l l monitor the budget execution o f 100 percent o f payments o f the Seguro and Family Allowances expenditures to be financed from the proceeds o f the loan.

74. In order to include a Municipality in the Seguro program (hence, making Seguro beneficiaries eligible for Grants under this Project), the MTESS signs an agreement with the Municipality (and Province, when it corresponds) to establish the terms o f this participation. These agreements include:

(i) the Municipality’s obligation to: (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 and training opportunities o f the SCE Beneficiaries; and

(ii) the Municipality’s and/or the Province’s obligation to: (I) provide the Employment and Training Services; and (11) if applicable, comply with the provisions o f the IPPF and IPP.

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3. Monitoring and evaluation o f outcomeshesults

Government Bank US$ million US$ million Component andlor Activity

75. The results monitoring framework for this project 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 the Heads o f Household, Heads o f Household Transition, and Lifelong Learning projects. 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 in Annex 3. 76. Component 3 (Technical Assistance) will contribute to the results framework o f this program and build long te rm capacity in the Government for monitoring social protection programs. Program activities wi l l aim at improving the information base on income transfer programs, and Seguro and Family Allowances in particular, through the new survey for analysis o f social protection programs, as well as improvements to the existing information systems.

Total US$ million

4. Sustainability

55.0a Component I: Seguro, Employment Bene@ and Training Program

77. This project i s supporting two o f the 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 o f Seguro, it i s expected that the Loan wi l l finance a Grant for a total amount that represents approximately 60 percent o f transfers, while the Government will fund the remaining 40 percent o f total program expenditures. In the case o f 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 o f all child benefits paid through SUAF, or 14 percent o f all transfers under Family Allowances.

80.0 135.0

Table 1. Source o f Funds: Argentina Basic Protection Program

Component III: Technical assistance component for the Social Protection System Total

0 5.0 5.0

820.0 450.0 1,270.0

1 765.0 1 365.0 1 1,130.0 Component II: Family Allowances' child benefis (through the Unique System of Family Allowances - SUAF)

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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 f i rst loan and the difficulties in the implementation process o f Jefes in the second case. Mult iple 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 implemented during previous 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.

8 1. 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 implying a 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 o f the beneficiaries’ database; and proposed mitigation measures; the overall residual risk has been decreased to Moderate. Proposed mitigating measures are intended to adequately cope with the identified risks. A detailed risk analysis for FM i s provided in Annex 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, given the proposed mitigation measures, the residual risk i s considered to be Moderate.

83. Other r isks (implementation, social safeguards, reputational) are considered either low or moderate, as described in the risk matrix. Thus, the overall risk for the project i s considered to be Moderate.

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Description of Risk

Possible impacts of the financial cr is is and Government response. The loan would support actions aiming at improving the performance of current Social Protection programs, and creating the conditions to expand their coverage in the near future.

However, there i s an important level o f uncertainty regarding the impact o f the crisis on Argentina. If impact i s moderate, a carefully implemented expansion strategy might work. However, if the impact i s larger, authorities might prefer to adopt an emergency approach, creating new programs or adapting others already existing programs, instead o f those supported by the loan.

Implementation capacity and sustainability. Supported programs expansion could be affected by implementation problems

Procurement (Component 3): risks concerning procurement for implementation of the project have been identified regarding: (a) the lack o f experience of the Undersecretary o f Labor Studies in Bank financed projects, b) the short term of the implementation of the component jointly with the proposed design to be carried out and (c) difficulties in the implementation of procurement arrangement for Bank financed project during the past year by UEC o f Employment Secretary

Financial Management. Project involves a large number of beneficiaries that are distributed across the entire country and thus

Rating before

mitigation measures Substantial

Low

Substantial

Substantial

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Mitigation Strategy

Whi le this i s a clear risk, the program i s designed to strengthen the institutional aspects o f the Seguro and Family Allowances programs to enable them to be scaled-up. The Family Allowances program already has an important impact on poverty and measures to improve transparency and efficiency o f the program will result in any expansion of the program having an even greater impact. Coverage targets wi l l be set for any subsequent financing for the programs. The advances in the program design supported by the loan will be an important advance in themselves, and the resulting improvements in flexibility and adaptability o f the programs would be ready for addressing any future needs.

Both programs are already in place and operating, without problems. Expansion i s planned in a progressive approach, to reduce impact on institutional capacities.

The CPyPE would hire a procurement consultant knowledgeable o f Bank procurement policies and procedures (with a minimum of 5 years of experience; Before negotiations, a project operational manual would be developed including the implementation arrangements and the procurement procedures; Define and submit the procurement plan for the first 18 months o f the project before negotiations.

Internal controls are built into the system, and controls over payments to beneficiaries have been strengthened in the recent past. Bank

Residual Risk

Rating

Moderate

Low

Moderate

Moderate

Description o f Risk

implying a large number of monthly payments, and difficult control.

Social Safeguards and Impacts: Lack of reliable data for monitoring programs impact may affect authorities’ capacity to assess the impact o f programs and design remedial actions if necessary.

Reputational: As one goal o f the Project i s to support readiness for a possible expansion o f coverage in supported programs, there i s a reputational risks if authorities fail to go ahead with this expansion

Support for social protection sector could be interpreted as unrestricted support to a l l policies, including some that might be controversial

Overall Risk Rating

Rating before

mitigation measures

Substantial

Moderate

Mitigation Strategy

debit cards will be predominantly used for payments to beneficiaries o f the SCE. Family allowances will be paid directly to beneficiaries’ bank accounts. In addition to the normal audit carried out by the AGN, a concurrent audit wi l l specifically examine the controls and procedures used for making payments.

The TA component would finance the launching of a new national Social Protection survey, managed by the Ministry o f Labor, to build a strong monitoring system. MTESS has run national independent surveys in the past, with successful results.

Regardless o f future improvements, reforms currently under implementation and supported by the Project are widely supported by analysts and policy makers

The PAD and other documents i s very explicit indicating that the support for these programs does not imply unrestricted support to all policies

Residual Risk

Rating

Moderate

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 o f 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.

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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 accordance with such IPPF and IPP; and the Borrower shall prior to providing any SCE Grant in the jurisdiction o f a Province or Municipality where the IPPF applies, enter into an agreement with the respective Province and/or Municipality setting forth their respective obligations in the implementation o f the IPPF and IPPs.

87. Reporting Covenant: the Borrower shall monthly furnish to the Bank reports to verify the evolution o f Monitoring Indicators discussed in Annex 3, including a report from ANSES on SUAF, a report from AFIP on the compensatory scheme o f Family Allowances and the monitoring reports for Seguro.

88. Disbursement Conditions: The Bank wi l l disburse up to 20 percent o f 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 wi l l only be authorized when the Disbursement Indicators have reached the target levels indicated for the “first disbursement level” in the table included in Section B.2 o f this PAD. Disbursements for Grants after the loan disbursed US$270 million from the loan account for Components 1 and 2 wi l l 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 o f this PAD. There wi l l be no disbursement conditions for Component 3.

(ii)

D. APPRAISAL SUMMARY

1. Economic analysis

89. Economic analysis found that Seguro and Family Allowances have a significant economic impact, in terms o f human capital formation, welfare and productivity o f workers. Seguro provides workers with better opportunities to find formal jobs, by expanding their ski l ls and increasing their employability. As o f December 2008, nearly 8,500 participants had found a formal job, representing approximately 40 percent o f all participants leaving the program.

90. Regarding Family Allowances, an analysis using a series o f data from recent years (from 2004 to 2006) indicate 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 (and considering only those with income below the normative threshold for FA), significant gaps are found in favor o f the AAFF program beneficiaries.

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91. On education and health, there are important differences in several indicators. Average human capital loss (that is, the gap between educational leve l 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 limited to 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 o f an effective safety net. The simulation exercise found that a family allowance benefit targeted to children in the 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 al l 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 chi ld under 18 in the poorest households (the bottom two quintiles). Finally, the fourth scenario assessed the 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 wel l 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 in Table 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 f i rs t 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

The Moratoria was a program implemented in 2007 that granted retirement benefits to nearly 1.7 million II

older citizens who did not have adequate contribution histories for the pension system.

24

unemployment benefit or a transfer targeted to poor households, would also be effective. On the other hand, expanding coverage o f the elderly in addition to the family allowances would have l i t t le effect, mostly because the Moratoria benefits have already reached near universal coverage for that age group.

95. The previous analyses wi l l be complemented as the main product o f Component 3, the Social Protection Survey, becomes available and i s used to assess the impacts o f the different programs (including Seguro and Family Allowances) in detail.

Table 2. Simulated policy impacts

Family Unemployment Allowances

and Old Age Baseline Poverty Transfer Family Allowances Transfer

Transfer

poverty 25.0% 22.4% 14.5% 19.8% 19.8% poverty gap 10.2% 8.9% 4.1 yo 5.7% 5.7% Gini 0.4765 0.4643 0.441 1 0.4542 0.454 Coverage (2 quintiles) 12% 19% 44% 38% 47% Total Cost (% GDP) 9.1 1% 9.66% 9.77% 9.58% 9.73%

extreme poverty 7.8% 6.5% 2.1% 2.7% 2.6%

Marginal cost (YO GDP) 0.55% 0.66% 0.47% 0.61% Source: WE3 Staff calculations. Note; Values are percentages except where noted (Gini coefficients).

2. Technical

96. The technical justification for the proposed project i s that: (i) it would promote employment o f current participants in income 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 o f readiness to expand these programs by including more informal and poor beneficiaries, as part o f the social inclusion agenda o f the Government.

97. Argentina has a strong experience with implementation o f these programs, and the Project wi l l contribute to deepen and accelerate the development o f 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 o f the arrangements for the proposed project was performed in l ine with OP.BP10.02 and guidelines issued by the Financial Management Sector Board (FMSB) 12. The overall conclusion o f the assessment i s that the project’s implementing agencies, MTESS and ANSES under the coordination o f the DNPOIC have adequate arrangements in place that

Financial Management Practices in World Bank-Financed Investment Operations, November 3,2005

25

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.

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 f i r m s ) 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 o f the Borrower’s capacity was carried out by the team and an action plan was prepared to address al l 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 M a y 2004 - Revised October 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated M a y 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 in the 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 pol icy 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. l3 These instruments provided insights into general attitudes to cash transfer programs and preferences 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 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

~

l3 The findings o f the consultations and survey are summarized in Argentina: Income Support Policies towards the Bicentennial, Report No. 44 194-AR The World Bank: Washington, DC. l4 Two instruments were used to assess the population views: first, over 300 consultations with stakeholders at the provincial level, and second, a national opinion survey (EPPS). Both are discussed in chapter 3 o f 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 PCN review i s “C.”

6. Safeguard policies

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 i t s 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. A t the present time and with the countrywide information available the municipalities that have indigenous peoples which would trigger o f OP 4.10, as per the criteria o f OP 4.10 are 112 municipalities in 14 provinces, listed in Annex I of the Indigenous Peoples Planning Framework (IPPF).

110. The proposed project wi l l target participants currently in the Seguro de Cupucitucidn Empleo Program. The location o f activities for Seguro depends on the location o f 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 municipalities o f the 112 mentioned in the preceding paragraph. There i s not sufficient information to know the extent to which indigenous communities participating in the Seguro would be present in those municipalities.

11 1. In addition, it i s expected that more municipalities wi l l be included in the Seguro during project execution, and they might also trigger OP 4.10 (as they might be included in the 1 12 municipalities mentioned before).

112. When Seguro beneficiaries are part o f 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 i s registered.

113. Following the provisions o f the IPPF, the IPPs wi l l incorporate culturally appropriate strategies o f promotion and communication adequate for indigenous communities in order to guarantee their full understanding o f Seguro. In particular, the following are envisaged: (i) the use o f existing material in the original languages; (ii) training o f 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 o f the specific modality that would be used to offer these services in each Indigenous community.

1 14. The Provinces or Municipalities where the specific incorporate culturally activities take place wi l l have the primary responsibility for preparation and implementation of the IPPs, taking advantage o f their experience in responding to needs and demands o f indigenous population. These entities wi l l 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, wi l l participate and monitor the implementation o f the IPPs. This monitoring and supervision strategy will ensure the implementation o f an appropriate intercultural approach for indigenous communities. Financial resources, when necessary, will be provided by the MTESS. The preparation and implementation o f the IPPs by the Government (including the necessary inter institutional agreements), satisfactory to the Bank, are considered eligibility criteria o f Seguro Grants to residents o f those provinces or municipalities.

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1 15. The IPPF prepared by the Borrower has been reviewed 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 i s 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 o f Lifelong Learning project preparation and implementation are highly relevant for the Basic Protection Project.

117. Finally, and given the nature o f 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 o f the Ministry o f Labor would be used. These channels operate through the provincial offices o f the Secretary o f Employment (Offices o f Employment and Professional Training).

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.0 1) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OP/BP 4.1 1) [I Ex1 Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OP/BP 4.10) [X I [I Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (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 to prejudice the final determination of the parties‘ claims on the disputed areas

29

Annex 1: Country and Sector or Program Background ARGENTINA: Basic Protection Project

COUNTRY CONTEXT

Economic Context

1. Argentina’s economic and social crisis o f 2001-02 was one o f the most severe losses o f 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 o f preserving the strides made against poverty and unemployment against the backdrop o f the worst global economic cr is is since the Great Depression. While Argentina is, in many ways, much better positioned going into this crisis than in 2001, the country’s ability to implement countercyclical policies i s limited by weak access to financing sources, particularly external, and uncertainty o f the global macroeconomic outlook and the direction o f economic policies.

2. Recovery from 2001 Crisis. In recent years, Argentina’s growth has been strong and underpinned by twin surpluses. In 2007, the economy grew by 8.7 percent, the fifth straight year o f 8-9 percent growth since the financial crisis o f 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 o f trade (high commodity prices), particularly since 2006. The economy also benefited from 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 o f 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 fel l from 21.5 percent in 2003 to 8.3 percent in 2007 - though poverty remains above the levels o f 1970s.

3. Recent growth performance. The four-month farm conflict that erupted in March 2008 took a toll on the economy, although growth kept i t s momentum until the second half o f 2008 when the global economic crisis began to affect more strongly Argentina. The conflict increased economic uncertainty which in turn led to a surge o f 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 o f financial sector stress resulted from the deepening o f the global financial crisis and the October announcement o f the nationalization o f 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

’ In early 2008 in response to these pressures, the Government reduced the real rate o f growth o f primary expenditures so as to neutralize the f iscal 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. 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 i t s 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 l ikely to be a source o f vulnerability in the medium-term. At the same time, Argentina s t i l l enjoys ample foreign reserves (US$46.4 bi l l ion at end 2008) that could help mitigate the impact o f economic shocks. O n the fiscal side, the key risk i s 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 and exchange rate stability and confidence.

6. The medium-term macroeconomic framework (2008-20 1 0)2 incorporates the preliminary impact o f the global crisis on the Argentinean economy and the policy measures undertaken by the government in the second hal f o f 2008 (the nationalization o f the pension system and the fiscal stimulus package in response to the crisis, in particular, the increase in capital expenditures, and the recent local debt swap o f Pre'stamos Garantizados). The CPS baseline macro projections are summarized below:

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 al l shown sharp declines during the last quarter o f 2008. Off icial figures place inflation at 7.2 percent in 2008, whereas the GDP deflator i s o f 19.4 percent3. Inflation i s also l ikely to decline in 2009, but projections are subject to considerable uncertainty.

Response to Global Economic Crisis.

0

Fiscal accounts. The primary fiscal surplus o f the central government i s 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 in 20 10.

Macroeconomic projections assume an average soybean price o f about US$330 a ton in 2009. CPI figures are contested by market analysts, thus the GDP Deflator i s also provided.

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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 in 2009 and 2010, respectively, taking into account the recent debt swap o f Guaranteed Loans. The net financing gap o f 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 o f claims by the Paris Club and holdouts from a 2005 debt restructuring.

0 External accounts. The current account surplus i s expected to deteriorate, but wi l l remain marginally positive in 2009 (0.1 percent o f GDP) and 2010 (0.7 percent o f GDP). In 2008, this surplus i s estimated to have reached around 3 percent o f GDP (2.9 percent in 2007). Due to recent volatility, gross international reserves declined to US$46.4 billion by end-2008 (about 9.7 months o f 2008 imports).

0 Monetary accounts. Money growth i s expected to slow, reflecting weaker domestic demand. Real growth o f net credit to the private sector i s 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 o f the end o f 2008. By end-February 2009 the exchange rate had reached 3.56 and i s likely to depreciate further.

Financial System. The Argentine banking system i s generally well placed to face the international crisis. Bank liquidity i s strong at 23 percent o f deposits, compared to 17 percent a year ago. However, the flight to quality by investors has resulted in an increase in Argentina’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 o f the economy. As o f September 2008, private sector loans represented only 12 percent o f GDP. Notwithstanding this analysis and given Argentina’s history o f financial volatility, the BCRA recently announced several measures to 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 o f a sharp contraction in both domestic and external demand. In this scenario, the exchange rate would likely depreciate substantially. The fall in output would also impact the fiscal accounts, and the primary fiscal surplus o f the Federal Government

Including Federal and Provincial Governments,

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could be as l o w as 1.3 percent o f GDP. As a result, net financing needs could reach US$7.7 billion, doubling the projected financing needs in the 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 implemented a pol icy o f more controlled depreciation to contain financial volatility and inflationary pressures. Fiscal accounts are deteriorating although the government will l ikely manage to keep fiscal primary surpluses if growth o f primary expenditures i s 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 i t s 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.

SECTOR BACKGROUND 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 al l 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 mi l l ion 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 in these three programs i s slightly over 1 million, as no new participants have been included since the original registration in 2002-2003.

1 1. Income transfer programs offer protection against most social risks in Argentina, but access to them i s 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 o f the most important

33

programs have been closed for several years now. Table A l . l presents a quick summary o f the main programs.

12. Spending in Jefes reached as much as 1 percent o f GDP in 2003, 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 j ob or they became ineligible), and a decline in real value o f benefits.

13. The core challenges o f the social protection sector in coming 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 in recent 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.

Figure Al . l . Evolution and breakdown of public expenditures on income transfer programs

Spending in Income Transfers us % of GDP

10% - _____._ _ ___ ._______

6% -~

5% r- 0 0 N

In 0 0 N

m 0 0 N

7

0 0 N

m m m r- m m

In - m m .- ..-

Breakdown of Spending I

lW% 8 Trabajar , Jefer,

Familiar, Segura

80% 8 Unemployment Insurance

-~ . .

OFamlly a II owa "cas

F3 Non- contrhutnry pensions

0 Pensions

I m m m o o o 0 m m m o o o o

- 0% age and survivor) m t. m 3 r n m

rl r l r l N N N N

Source: World Bank staff based on Ministry o f Economy 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. If the global crisis results in higher 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 if necessary.

35

Table Al.l. Income Transfer Programs in Argentina. Basic description as of 2008 Number Of SF;:$ Implementin

g agency Financing Beneficiaries Duration Eligibility of benefits source (approx) (est.)

Program Description

Contributory 5,400,000 6% GDP

National Pension System

Provincial pension systems

Family allowances

Unemploy- ment insurance

Non- contributory pension

Jefes de hogar

Familias

Seguro de Capacitacibn y Empleo

Provincial Income Transfer

Old Age, Survivors and Disability benefits, financed through PAYG scheme

Old Age, Survivors and Disability benefits, financed through PAYG scheme, for provincial civil servants

7 benefits (pregnancy, birth, adoption, per children, disabled children, school support, marriage)

Unemployment benefit, decreasing in time. Compatible with family allowances

3 benefits (old age, special laws, social protection)

Cash transfer program for unemployed/informal heads of household

CCT, conditional to school attendance and medical checks for children.

Income transfer and to training and active labor services

Cash transfers, linked to poverty alleviation, food distribution and

lndefinitc

Indefinite

For child benefits, until 18 years old.

4 to 12 months.

Indefinite

While children are younger than 18

Indefinite

maximum 2 years

varies by program

Retirement age: 60165 (womenimen) Vesting period: 30 yrs. Disability and Survivors: Vesting period of 18 months

Varies, by province, similar to National System

Formal salaried workers

Formal salaried workers not in the agriculture or public sector. Vesting period: 6 months

SP benefits: Disabled or older than 70 and poor

Unemployed head of household with children younger than 18. Unemployed head of household with two or more children younger than 18. Unemployed head of household that participated in the Jefes program.

varies by program

(employee and employer). Deficit covered through general taxes. Contributory (employee and employer contribution)

Contributory (employer contribution)

Contributory (employer contribution)

Non- contributory

Non- contributory

Non- contributory

Non- contributory

Non- contributory

37,000

5,000,000

1 14,000

776,000

500,000

600,000

72,900

nla

ANSES (National administration o f Social Security)

1 Yo GDP

Provincial pension agencies

0.7% GDP

ANSES (Private sector) Government (public sector)

0.05% GDP

ANSES

0.4% GDP

0.1% GDP

Ministry of Social Development

ANSES

Ministry of Labor,

ANSES

(MDS) -

(MTESS) -

0.2% GDP

MDS

0.03% GDP

nla

MTESS

Provincial governments

Programs workfare policies Source: World Bank staff, based on legislation

SEGURO: EMPLOYMENT BENEFIT AND TRAINING 16. In October 2004, the Government o f Argentina decided on a two-pronged transition strategy for the Heads o f Household Program to be jointly managed by the Ministr ies o f 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 o f 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 Household Program to other programs. The main aspects o f the transition strategy included in Decree 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 o f families, particularly those with numerous small children, who have more structural disadvantages (low education levels, for example).

17. The Ministries o f Labor and Social Development were to joint ly 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 o f 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 in the transition strategy though the creation o f a non-contributory Seguro de Capacitacidn y Empleo program (Seguro, Employment Benefit and Training), in Decree 336/06. Init ial ly 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 o f 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 i t s 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 f job- search assistance and training.

37

Figure A1.2. Trends in Transition Strategy for Heads of Households5

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 o f Labor, Employment and Social Security (MTESS) i s the agency responsible for managing Seguro through bilateral agreements with provinces, the City o f Buenos Aires, and municipalities. The municipalities have the key role for the implementation. Seguro i s implemented by the Ministry o f 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 o f Seguro apply for the program through municipal Employment Offices (EO) that are part o f the Network o f 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 information about 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 o f participants’ activities are registered in an electronic management information system (MIS) at MTESS.

This i s just trends in the transition strategy. I t does not include exits to formal employment or other reasons.

38

2 1. Participation in the program i s limited to two years. Cash benefits are AR$225 during the first 18 months and AR$200 during the last 6 months. In addition, participants receive j ob 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 i s 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) j ob 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, 18 1 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, professional training and job training activities. Municipalities guarantee several basic services for Seguro beneficiaries: they collect information on their labor history, supervise their j ob search, offer short workshops on j ob 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 i s registered in a management system and performance i s regularly supervised by the Ministry o f Labor through i t s provincial agencies.

23. By the end o f 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 le f t 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 exited because they were able to access a pension benefit.

39

Figure A1.3. Participants leaving Seguro, by reason

Cumulative 33,000

30,000

27,000

24,000

21,000

18,000

15,000

12,000

9,000

6,000

3,000

0

w Non contributory pension or retirement benefit Enter into formal work

\ End of contract

2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

Source: Ministry of Labor

24. Complaints System: The Secretary o f Employment has a system for handling complaints and accusations o f 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 o f processing o f complaints in their own area. The work i s coordinated with the Call Center (a free phone number i s provided) which i s the main source o f channeling fraud accusations in the Program. The system receives:

a. Requests for information: A system o f standard messages developed to answer frequently asked questions using taped responses, such as dates o f 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 i s 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 o f employment. From October 2006 to January 2009, (CODEM) o f the Ministry o f Labor received 56 allegations concerning Seguro.

40

Future Plans

26. The MTESS plans to continue expanding coverage o f 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 o f beneficiaries should reach 110,000 by the end o f 2009; and 140,000 by the end o f 2010.

27. The number o f Employment Offices i s also expected to grow. As o f the end o f 2008, there where 260 municipal Employment Offices in the network o f employment services, but only 189 o f those provide access to Seguro. In order to avoid bottlenecks in the provision o f services, Ministry authorities plan to expand gradually this number, to reach 250 by the end o f 2009, 300 by 2010 and 350 by 201 1. Increasing the number o f offices will allow more participants to be incorporated in the program.

28. The Ministry plans to expand the number o f participants to include not only more o f the current target population o f Jefes beneficiaries, but eventually, other unemployed individuals who do not receive Jefes benefits. The Ministry i s also considering an increase in the cash benefit amount o f the program improving income transfers, through an incentive scheme:

29. According to data from the Ministry almost a third o f 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 o f benefit for these the participants, as well as to improve the extent to which this information i s recorded in the management information system.

30. Various challenges exist for the future expansion o f Seguro. On the one hand, as mentioned, participation i s voluntary. In addition, so far municipalities also can decide whether or not to make available and promote Seguro. There i s currently a fairly large gap between the number o f Employment Offices and the number o f municipalities that provide Seguro. Municipalities do not strong incentives to encourage the transfer since it implies considerable an institutional effort for them (e.g. to set up the Employment Office and establish the network o f resources and services for the insured, strengthen relations with the sector employer, etc.). In this context, 4,000 new participants per month into Seguro i s feasible, but i s quite a bit higher than the average since the program started.

31. The Ministry i s implementing a similar scheme o f 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 o f the information management system and monitoring o f results. The management system i s the same for both programs and the Youth Program i s also implemented through the Employment Offices. Although the Ministry i s very advanced in the development o f the information platform which wi l l possible the incorporation o f information on the results o f the employment activities, there i s s t i l l no specific evidence on this issue. Even so, the Project undoubtedly wi l l 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 strengthen the overall role of the Employment Offices and particularly their capacity to support j ob 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 mi l l ion in 2009, close to US$135 million. O f those, AR$459 mi l l ion 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 mi l l ion for this shift in 2009. Thus, including financing from both loans, the Bank would finance approximately 70 percent o f al l 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 in training and education programs. The loan will support the Government to advance in the implementation o f 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 j o b placement services while maintaining a basic income for unemployed workers.

FAMILY ALLOWANCES 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 mi l l ion chi ld benefits per month. This last type o f benefit represents approximately 70 percent o f a l l expenditure on AAFF, paying a flat amount o f AR$135 (US$40) per child. This contributory program i s 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 in Argentina. 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 f i rs t maternity benefit dates back from

SUM stands for Unique System o f Family Allowances (acronym in Spanish).

42

1934, and the first chi ld 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 o f the payroll system. Together with the institutional reforms o f the pension system in the late 1 9 6 0 ~ ~ an administrative reform grouped the compensation 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 fami l ies have never participated in the system. In 1991, these three funds were consolidated into one program, administered by the newly created ANSES. Only c iv i l servants and private sector teachers/professors continue to be excluded from the consolidated system as o f 2008.

37. L a w 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 s t i l l concentrated mostly on child benefits. Three benefit levels were created, declining for higher income workers. This scheme resulted in a 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 l iv ing in Patagonia, although the number o f beneficiaries in this 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 c iv i l 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 i s basically explained by the increase in the 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 c iv i l 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 i s responsible for ha l f the expenditure on AAFF benefits. The compensatory fund s t i l l 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). * Teachers and professors working for the private education sector also receive their benefits from an exclusive compensatory fund. Nevertheless the data i s reported jointly with the rest o f the private sector.

43

percent) explain the rest o f the AAFF expenditure. Almost 70 percent o f SUAF expenditure was paid on chi ld 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 i s slightly different than SUAF. N o qualitative differences are observed, though.

Figure A1.4. Expenditures on Family Allowances by subprogram, as YO of GDP 1998-2008

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -t Compensatory Fund I SUAF %: UI 181 Pensions 0 Fed Govt*

* 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 maximum level 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 j o b 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 in recent 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 surpluses lo. Nevertheless, al l social security programs are grouped together by ANSES.

42. In 2008, an average o f 2 mi l l ion children received a monthly AAFF benefit through the SUAF (the figure edged towards 2.4 mi l l ion 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 c iv i l service. A rough estimation would say that another 2 mi l l ion was covered by the former and 1 mi l l ion for the latter. ANSES pays 100 thousand 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 l ikely that most o f the difference i s explained by the children younger that five. O n 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 o f benefits paid by the Family Allowances program (benefits paid directly by ANSES), 2008

S UAF

year total monthly average

Child 24,634,823 2,052,902 Disable child 367,170 30,597 Spouse Pregnancy 4 86,97 9 40,582 Maternity - 105,344 8,779 School support 1,625,512

UI+Pensions+former PF

year total monthly average

2,180,802 181,733 940,599 78,383

7,821,291 651,774 29,605 2,467

85,444 Birth 187,407 Adoption 58 1 Marriage 59,420 Source: ANSES

43. As o f 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 Chi ld 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, in practice the benefit is paid to al l children with schooling age.

44. The most important benefit (Child) pays, since September 2008, AR$135 per chi ld to most beneficiaries, with some exceptions by salary level and region o f residence. According to 2007 data, out o f the 6.6 mi l l ion formal workers, 60 percent were eligible to earn the highest chi ld 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

lo As o f 2008, 7 million salaried workers contributed a monthly wage o f ~ ~ $ 2 , 3 0 0 , which gives an annual contribution (7.5 percent) o f AR$ 15 billion, equivalent to 1.4 percent o f GDP.

45

Disabled chi ld benefit pays nearly four times more than the Chi ld benefit. School support benefit i s paid once a year, and i t ' s flat across income levels and slightly higher than the Chi ld benefit. Similarly the Maternity benefit does not present targeting restrictions. Marriage, Birth and 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

pension)

AR$ 100- ARt2401- AR$3600- AR$ 4800+ 2400 3600 4800 Note

Pregnancy 135 102 68 0 Variable across the 4 regions

Maternity gross wage No income ceiling

Child 135 102 68 0 Variable across the 4 regions

Disable child 540 405 270 0 Variable across the 4 regions

Spouse 41 Pensioneers only, variable across two reaions

'-I.- .- ... -

Marriage 900 0 Both eligible

Birth 600 0 Flat across regions

Adoption 3600 0 Flat across regions

School support 170 0 Variable across the 4 regions

45. As in other social security programs, there i s no indexation ru le for the benefits amount' ' . Since the 200 1-02 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. A s 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 o f AR$130. Along the same period Chi ld benefits experienced four increments. In 1996 the School support benefit was equivalent to 3.25 times the largest Chi ld benefit, contrasting with the current 1.25 relation.

" The only exemption i s the pension system (the largest Social Protection program), whose indexation rule was approved by Congress in November 2008.

46

Figure A 1 5 Wage bands, benefit amounts and average wage. 1996-2008

5000

4500

4000

3500

T3000

E 2500

a 2000

1500

1000

500

c .- I

0. 0:

n

0 wage band 3 ';wage band 2 ' X wage band 1 0 lower limit Oaverage wage

3.500.0

3,000.0

2,500.0

= .- z 2,000.0 E O c I

61,500.0 a

1,000.0

500.0

160

140

120

1005 = m

E 80 5

a 60

I 1

- average wage (left axis) I - children, pregnancy (wb l ) - 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 i s AR$135. The latter i s 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 o f provinces and departments that enjoy this differences has been slowly decreasing, tending to a flat benefit at the Zone Cero values.

Figure A1.6. Child benefits by geographical region and wage band. Applicable since Sept. 2008

Cruz, Tierra del Fuego) (Catamarca;, Z2 (Chubut)

Salta’, Jujuy’, Santa Cruz,

Fuego) jGeographicalzonel Tierra del

* Some departments of the province. * * Only for Child and Pregnancy benefits

It band AR$) I Neuquen, Rio Zone Cero Negro, Salts*,

Formosa;, Mendoza.)

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 o f SUAF implied that employers make the full contribution to the ANSES as with any other contributory scheme, and then ANSES pays

’* In fact, even as o f today ANSES i s not able to report with accuracy the number beneficiaries under the compensatory scheme.

48

the benefits to workers directly. In most cases, the system was implemented in f i r m s where workers were receiving their salaries through a bank account, so that ANSES could simply transfer the allowances to the workers account periodically.

48. ANSES has been slowly increasing the number o f f i r m s and workers covered by SUAF since 2003, when less than 300,000 Child benefits were paid through this system. By the end o f 2008, the figure had reached 2.4 million, representing nearly fifty percent o f all benefits, including those paid directly by the Federal or local governments as employers, or sixty percent o f 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 o f their employment status.

49. The series o f participation o f SUAF on all Family Allowances payments to 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 i s not paid at the same time to all workers. Figure A1.7 shows that between 1997 and 2008 SUAF increased i t s participation in total expenditure from 15 percent to 70 percent, among formal salaried workers in the private sector. The rest o f the payment methods decreased also i t s relative importance. This figure i s highly volatile due to the impact o f some benefits that are paid once a year. Thus, a more stable series, showing a twelve-month moving average, i s included in the figure.

50. Started as an exception to the rule, the method o f direct payment has become the core strategy to simplifL bureaucratic procedures while reducing the risk o f fraud. In March 2008 ANSES issued Resolution 292 establishing that SUAF would become the only acceptable method available for the payment and control o f the benefits o f the AAFF program in the future. The transition to complete the switch to SUAF for all employers would be implemented progressively. Some new rules, including that all new f i r m s are required to registered in SUAF, and that f i r m s operating through the compensatory fund are required to switch if their net contributions are negative, resulted in a progressive expansion o f SUAF. Gradualism i s necessary to ensure that ANSES systems would not overload, and that the transition would be implemented in a controlled environment, but the program i s expected to be fully implemented by 201 1.

49

Figure A1.7. Family Allowances expenditure by payment method (formal salaried workers in the private sector) 1997-2008

100%

80%

60%

40%

20%

0%

SUAF E 3 Compensatory Fund -Avg l a s t 12 months

51. Complaint process: Formal salaried workers whose employers are enrolled in SUAF can claim their benefits (if they did not receive it but believe to be eligible) using three alternative ways: a) in person at an ANSES local office; b) over the phone through a call-free calling center; c) or v ia e-mail to denuncias@anses.nov.ar. In al l 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 i s 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 fol lowing payment round.

52. The loan i s expected to finance the equivalent o f 790,000 benefits per month, at a per capita value o f AR$l35, for a total o f AR$107 mi l l ion /month or AR$1,280 mi l l ion a

50

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 o f payments through SUAF and 31 percent o f payments o f Child benefits by SUAF, respectively.

51

Annex 2: Ma jor Related Projects Financed by the Bank and/or other Agencies ARGENTINA: Basic Protection Project

Sector Issue Project Latest Supervision (ISR) Ratings

(Bank-financed Projects only) Implementation Development

Progress (IP) Objective (DO)

Bank-financed Social Protection V I Completed (S) S Emergency Workfare

Transition from Emergency Workfare

Vocational Training

Institutional Reengineering

Other Agencies Training and Employment Services for Poor Women Conditional Transfer Program

Conditional Transfer Program

Transition from Emergency Workfare

Vocational Training

Education for young people focused on the National Labor Market

Project - Jefes de hogar (Heads o f Household)

Heads o f Household Transition Loan 7369- AR Lifelong Learning Project - Loan 7474- AR Institutional Strengthening - ANSES

7157-AR

I1 TA 73 18-AR

FORMUJER (IDB)

Support for Plan Familias I (IDB) Programa de Apoyo a1 Sistema de Proteccidn e Inclusidn Social- Fase I (IDB) Support to Heads of Household Transition Loan (UNDP) Support to Lifelong Learning Project (UNW European Union

Ongoing (S) S

Ongoing (MS) MS

Ongoing (S) S

Completed

Ongoing

Planned

Ongoing

,Ongoing

Planned

52

Annex 3: Results Framework and Monitoring ARGENTINA: Basic Protection Project

Results Framework 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 o f the proposed Project (Table A3-

2. The Government and the Bank also agreed on the fol lowing results framework which would be used to assess whether the proposed Project achieves i t s overall development objectives and how intermediate results, by component, would be used.

Table A3.1. Results Framework

2) *

PDO

The Project Development Objective i s to increase the effectiveness of Argentina’s income transfer programs for the unemployed and families with children, by expanding the number o f participants and improving design features, transparency and accountability in two core social protection programs

Intermediate Outcomes

Component I: Employment and Training Insurance Program

Expand the Seguro program, including the cash benefit and availability o f training and basic education services.

Increase access to Employment Offices and the availability o f employment services. Component 11: Family Allowances

Shift to direct payment o f Family Allowances (by SUAF).

Increase efficiency o f the delivery

Project Outcome Indicators

Number of Seguro beneficiaries exiting into formal employment Percentage of beneficiaries o f Seguro participating in training, education, or employment support activities. Percentage of spending in Family Allowances paid through direct payment system. (1 2-month moving average).

Intermediate Outcome Indicators

Number of beneficiaries o f Seguro

Number of Employment Offices providing Seguro services.

Number of f i r m s registered in SUAF

Amounts claimed to ANSES for

Use of Project Outcome Information

Assessment of Seguro’s effectiveness in supporting reentry o f participants in labor market

Consolidation of SUAF program as the only channel for ANSES to pay Family Allowances

Use o f Intermediate Outcome Monitoring

Check access of participants to employment services, training and education services and propose adjustments to the program if necessary.

Monitor the shift to direct payments and adjust as necessary.

Assess the caDacitv of ANSES to

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of Family Allowances. Provide income support to working families with children and protect them from poverty.

Separate payment o f wages and income transfers from the AAFF program

Component 111: Technical Assistance for the Social Protection System

Improve the availability o f data for monitoring social protection programs.

Strengthen capacity o f the Ministry o f Labor to analyze policy design and outcomes.

reimbursement when allowances to be compensated exceed expected contributions;

Number o f child allowance benefits paid by ANSES through SUAF;

Number o f SUAF beneficiaries receiving their transfers directly in their bank accounts

Social protection survey i s designed and implemented.

Indicators on the coverage, targeting and adequacy of income transfer programs are available.

introduce reforms in order to extend coverage

Regular analysis of coverage, targeting and impact of programs.

ARRANGEMENTS FOR RESULTS MONITORING

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 o f this Project by improving the information base on income transfer programs and Seguro and Family Allowances in particular. The Component will finance the implementation o f a new survey for analysis o f social protection programs; as well invest in improvements in the existing information systems.

Component I: Seguro, Employment Benefit and Training Program

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 i t 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) i s central to the execution and management o f beneficiaries transferring f rom 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) in the M I S and validated by MTESS.

7. The existing M I S 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 i t 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- Sistema Integrado 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 j ob placement and/or employed workers seeking career advancements who receive training under publicly financed schemes. In addition, the Ministry manages the beneficiary registry for the Heads o f Household program.

10. With the aim o f 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 al l Seguro beneficiaries are receiving their payment in cash, through bank or mai l branches as they l ive in isolated areas and have no access to ATMs (thus making them ineligible for Grants). In al l 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 i s subject to audit by the national audit agency (AGN), and a summary o f that information i s sent to the MTESS. I t i s important to note that Banco Nacidn has no fiduciary role in the program, other than being the holder o f the accounts.

Component 11: Family Allowances

12. The project will be monitored with a series o f indicators which track the overall development o f Family Allowances and i t s 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 o f 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 l is ts based on new employer’s reports and information received directly from beneficiaries. The Control direction reviews the resulting benefit l ist, correcting individual cases as necessary, in consultation with local offices o f ANSES across the country. I t then transfers the information to the Finance department, which issues the transfer orders to banks.

14. ANSES will submit, every month, a copy o f 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 i s 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 i s carried out every month. A f i le i s created which contains the necessary documentation to endorse the recording and payment o f the benefits paid.

56

x s 5

0 0 0 m -

0 0 0 m -

0 0 0 m

$ 5 2 l i B E m W

x 2 5

g m

x x Z B 8 8 E E

0

s N If

Annex 4: Detailed Project Description

ARGENTINA: Basic Protection Project

1. The proposed Project i s a Specific Investment Loan, supporting the social protection sector programs in Argentina. The operation wil l 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 o f training and j o b placement services, the supported programs’ should result in better 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 o f coverage in the medium term.

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 in the 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.

COMPONENT I: EMPLOYMENT AND TRAINING INSURANCE PROGRAM (ESTIMATED AMOUNT US$80 MILLION)

3. This component will support the operation and scaling up o f Seguro during 2009. Seguro i s 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 i t 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 o n 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 f j ob-search assistance and training.

58

5. The component wi l l finance income transfers through Grants to eligible participants o f 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 ~ t i v i t i e s ~ ~ . The component will not finance the employment and training services provided by the Seguro program.

6. Participants qualify to receive Seguro transfers 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 must be unemployed workers

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. In this agreement they commit to:

i.

.. 11.

... 111.

iv.

Accept job offers received through the Municipal Employment Office (MEO);

Participate in interviews and job placement workshops organized by the MEO;

Join training activities (both basic and professional) offered to them by the MEO;

Renounce to their participation in Jefes program;

e. Participants are excluded from the program if: i. They find a formal job;

ii. They received the benefit for two years, unless otherwise agreed by the Bank;

iii. They reject job offers without justification; and

iv. They fail to comply with the conditions set in the 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) and the IPP has been approved by the Bank.

7. The Ministry o f Labor, Employment and Social Security (MTESS) i s the agency responsible for managing Seguro through bilateral agreements with provinces, the City o f

*’ The incentives program i s an innovation that has been designed by the MTESS staff and i s ready to be implemented, once it receives formal approval. The Project would finance them, after a review of regulations confirms that their design i s satisfactory to the Bank.

59

Buenos Aires, and municipalities. The municipalities have the key role for the implementation. Seguro i s implemented by the Ministry o f 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 o f Seguro apply for the program through municipal Employment Offices (EO) that are part o f the Network o f 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 information about 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 o f participants’ activities are registered in an electronic Management Information System (MIS) at MTESS.

9. Participation in the program i s limited to two years. Cash benefits are AR$225 during the first 18 months and AR$200 during the last 6 months. 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 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 i s part o f their salary (thus, this i s a temporary employment subsidy to public agencies).

10. The MTESS plans to continue expanding coverage o f 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 o f beneficiaries should reach 110,000 by the end o f 2009; and 140,000 by the end o f 2010.

11, The number o f Employment Offices i s also expected to grow. As o f the end o f 2008, there where 260 municipal employment offices in the network o f employment services, but only 18 1 o f those provide access to Seguro. In order to avoid bottlenecks in the provision o f services, Ministry authorities plan to expand gradually this number, to reach 250 by the end o f 2009, 300 by 2010 and 350 by 2011. Increasing the number o f offices wi l l allow more participants to be incorporated in the program.

12. The Ministry plans to expand the number o f participants to include not only more o f the current target population o f 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:

A monthly supplement o f AR$75 for participation in a program for completion o f basic education. This supplemental monthly payment exists at the moment in the program; the modification implies the increase o f the amount (from the existing AR$50) and an extension o f the reception period to 10 months;

ii. A temporary supplement o f AR$150 for completing basic education (receipt o f a certificate;

iii. An increased monthly benefit o f AR$125 for on the j o b training activities; iv. An increase in spaces in the labor market insertion program for adults over 45

i.

years old and women.

Component 11: 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.

b.

C.

d. e.

Beneficiaries must be workers formally employed as salaried by a private firm registered in SUAF;

Beneficiaries’ family information, including date o f birth and tax number identification for all children, i s registered in ANSES’ data system;

Beneficiaries must have children younger than 18 years old, living in Argentina and single, under their care, including natural, adopted, and foster children; and

Beneficiaries gross monthly salary must be up to AR$4,800.

Benefits must be paid through SUAF directly to the beneficiary bank account.

16. Beneficiaries declared gross monthly salary must be below AR$4,800. I f salary i s between A R $ l 00 and AR$2,400, benefits are AR$135 per chi ld per month. For salaries between AR$2,400 and AR$3,600, benefits are AR$ l02 per chi ld per month. For salaries between AR$2,600 and AR$4,800, benefits are AR$68. Also, benefits are increased for beneficiaries living in less advantaged regions:

61

Salary Range

AR$2,400.- Salary between AR$IOO and

Salary between AR$2,400 and

AR$4,800.- Salary between AR$3,600 and

AR$3,600.-

Mendoza, Salta and Formosa Region 2 includes the province o f Chubut Region 3 includes some Departments in Catamarca, Jujuy, and Salta Region 4 includes the provinces o f Santa Cruz and Tierra del Fuego

I Base value 11 Region 1 11 Region 2 11 Region 3 I Region 4 mmmFl AR$291

AR$270

~ 1 ~ 1 ~ ~ 1 AR$270

17. 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 by 2010, when the compensatory scheme would be closed or limited to exceptional cases.

18.. The loan i s expected to finance the equivalent o f 790,000 benefits per month, at a per capita value o f AR$135, for a total o f AR$107 million /month or AR$1,280 million a year, equivalent to US$365 million. This amount represents approximately 14 percent o f total spending on family allowances (including SUAF and compensations, but not civil servants), 24 percent o f payments through SUAF and 31 percent o f payments o f child benefits by SUAF, respectively.

19. This component wi l l support the Government to advance i t s 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. B y 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 ASSISTANCE FOR THE SOCIAL PROTECTION SYSTEM (ESTIMATED AMOUNT us$5 MILLION).

20. The Technical Assistance component will support capacity building within the MTESS, particularly in the area o f monitoring and evaluation o f social protection policies. While the Ministry has strengthened i t s 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 i t s 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.

21. The component wi l l include four activities: (i) Design and application o f the 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

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 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 household members;

b. Access to and impact o f social protection programs, with focus on income transfers;

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.

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 in recent years, the only two regular sources o f 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 o f 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 published on a quarterly basis. The change also affected the design o f the questionnaires, which became more detailed, although they s t i l l 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 in social protection policies monitoring and evaluation. First, its geographical coverage continues to be l imited to part o f the urban population, thus excluding part o f the population that i s l ikely to be more vulnerable and less accessible by these programs. Second, the design o f i t s questionnaires and sampling framework has continued to be mostly focused on labor market topics.

26. In recent years, in a context o f methodological controversies and political conflicts around INDEC, the E P H 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 (in fact, 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 i s considered valuable not only for the new data that it will provide about San Juan, but also because it will serve as a pi lot for some aspects that could be further explored in a 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 o f the social protection programs and their beneficiaries.

29. In addition, the Project would support the preparation o f several qualitative studies to improve knowledge about the dynamics o f Seguro at the local level, to improve the coordination between the Ministry and local authorities.

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Annex 5: Project Costs ARGENTINA: Basic Protection Project

Local Foreign Total

million million million Component 1 : Employment Benefit and 135.00 135.00 Training Program Component 2: Family Allowances 1 130.00 1130.00 Component 3: Technical Assistance for the 4.00 1 .oo 5 .OO Social Protection System

Project Cost By Component and/or Activity US$ US$ US$

Total Baseline Cost 1269.00 1.00 1270.00 Physical Contingencies Price Contingencies

Total Project Costs' 1269.00 1 .oo 1270.00 Interest during construction

Front-end Fee Total Financing Required 1269.00 1 .oo 1270.00

'Identifiable taxes and duties are US$O, and the total project cost, net o f taxes, i s US$1236 million. Therefore, the share o f project cost net o f taxes i s 100 percent.

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Annex 6: Institutional and Implementation Arrangements ARGENTINA: Basic Protection Project

Framework

1. Project implementation arrangements fall into three broad categories; related to (i) counterpart agency; (ii) agencies responsible for the implementation o f project components; and (iii) implementation o f project and program monitoring and evaluation functions. The latter arrangements are described in detail in Annex 3 ,

Project Implementation

2. Agencies, Roles and Responsibilities: The project wi l l 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 o f Argentina’s institutional and fiduciary framework, the proposed project would build on the existing organizational and management structures o f the Ministry o f Labor, Employment and Social Security (MTESS) and the National Administration o f 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 o f the MTESS but through the Undersecretary o f Labor Studies (Component 3).

3. The coordination between the National Government Agencies (MTESS and ANSES) and the World Bank wi l l be the responsibility o f the Ministry o f Economy and Public Finance (MEPF), through the National Directorate o f Projects with International Credit Organizations (DNPOIC).

4. The National Directorate o f Projects with International Credit Organizations (DNPOIC) wi l l be the Bank counterpart for the project. The DNPOIC wi l l have overall responsibility for achieving Project goals through the coordination o f activities with the specific Agencies responsible for the implementation o f Project’s components; MTESS, though the Secretary o f Employment (Component 1) and the Undersecretary o f Labor Studies (Component 3), ANSES (Component 2). 5. Provinces and municipalities have a role in the implementation o f Seguro, as they are responsible o f managing the employment offices, provide different services to Seguro beneficiaries and design and implement IPPs when necessary. They coordinate their roles with MTESS through formal agreements.

Project Management

6. The Project wi l l be carried out by the Borrower through MTESS (Components 1 and 3) and ANSES (Component 2), under the overall coordination and supervision o f DNPOIC. The specific coordination activities o f DNPOIC will include: (a) on-going planning and supervision o f the project; (b) applying an Operational Manual and verifying that the operational procedures, as established in the Loan Agreement and in the Operational Manual, are being complied with; (c) consolidating project budgeting, action plans and disbursement plans (d) consolidating reports on financial performance and

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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 o f implementation o f 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 o f the Project.

7. The Coordinator for the project (the Director o f the DNPOIC) and his team wi l l be responsible for establishing prior to negotiations and applying the operational directives and activities o f the project, ensuring that they are consistent with the objectives o f the project. The Borrower wi l l allocate counterpart fwnds for the financing o f the activities o f the coordinating unit and for the implementation o f the audit required by the Loan Agreement. The DNPOIC i s currently in charge o f programming loans with International Credit Organizations in accordance with National Government’s priorities. The staff o f the DNPOIC has wide experience in project supervision, monitoring and evaluation. Eventually, staffing o f 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 i s not expected to develop technical expertise that already exists in the l ine departments o f MTESS and ANSES. The project implementation arrangements would build on the experience o f these national programs. Where there i s a particular need to build implementation capacity, this would be done by strengthening existing line departments in MTESS and ANSES. The Operational Manual would include a description and TORS o f the positions that need to be strengthened.

9. ANSES as well as MTESS are part o f the National Public Administration, and thus their expenditures execution processes are included in the Integrated Financial Management System (SIDIF). SIDIF wi l l monitor the budget execution o f 100 percent o f payments o f Seguro and Family Allowances expenditures to be financed from the proceeds o f the loan. For this reason, there no need to sign any agreement with ANSES, for the execution o f project funds.

Implementation Strategy

10. Implementation of Component 1. Component 1 will finance Grants to participants o f Seguro, the Employment and Training Insurance Program, which was introduced by National Decree 336 in 2006 to assist the beneficiaries o f the Heads o f Household Program to re-enter the labor market. Seguro combines a cash benefit to poor families with active labor market support, through a combination o f job search assistance and training, as described in Annex 1.

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11. Under the current loan it i s expected to finance income transfers to participants that were part o f Jefes, paid by debit cards. The Bank’s share o f income transfers will be approximately 60 percent o f the total budget allocation to the Program.

12. Seguro i s currently being implemented by the MTESS, which i s 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 tracked job 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 registered employed worker (SIJP-Sistema Integrado 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 been credited) i s kept at the bank and subject to audit by the Auditoria General de la Nacibn (AGN). 15. MTESS checks internal consistency within the beneficiary registry and as a result, drops beneficiaries and corrects situations. Before a payment i s 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 proposed Project, these efforts would continue.

16. Disbursement requests for Component 1 would be made as discussed in Annex 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 chi ld 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 l o w 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 f i rms. 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 in Annex 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 f i l e (“Expediente”) which i s registered in the SUAF system, managed by ANSES. This Expediente contains al l the necessary back up information to proceed to the

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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 Prestaciones y Servicios).

20. The Grants will be paid fol lowing 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 M I S 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 i s signing the payment approval resolution which authorized to transfer the money through the banking system.

2 1. In most cases, the SUAF i s implemented in 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) i s kept in the Expediente and i t s corresponding electronic records, once the banks have sent the supporting documentation back to the Argentine Central Bank (BCRA) and ANSES. The whole procedure i s subject to audit by the Auditoria General de la Nacidn (AGN).

22. Disbursement requests for Component 2 will be made as discussed in Annex 7. 23. Implementation o f Technical Component. Component 3 will support capacity building within the MTESS, particularly in the area o f monitoring and evaluation o f social protection policies.

24. The Undersecretary o f Labor Studies o f the MTESS will be responsible for implementing this component, ensuring that the content o f the activities to be implemented i s consistent with the objectives described in Annex 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 o f reference for contracting consultant services; (d) administration o f component activities, including agreements, contracts, procurement and the Procurement Plan, (e) the procurement actions, and (0 preparing 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 in the procurement o f goods.

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26. The CPyPE would be in charge o f 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 o f funding component activities, according an agreed action plan. As discussed in Annex 7, funds wi l l be deposited in the Designated Account managed by DNPOIC and payments for eligible expenditures incurred wi l l be made from an operative bank account in local currency under control o f the MTESS.

28. In addition, Annex 7 and Annex 8 outline the arrangements according the procurement guidelines and the financial management arrangements for this component.

Procedures and Relationships

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 wi l l prepare prior to negotiations and make applicable thereafter a draft o f an O M o f the project, which would define roles, responsibilities, mechanisms, schedules and accountability arrangements, necessary for implementation o f the project such as: institutional arrangements; operational procedures, eligibility criteria o f 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 o f the Project, and evaluation plans; and Performance and Disbursement Indicators. The O M wi l l also include procedures for carrying out Component 1 and 2, including financial reporting and disbursement procedures.

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.

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Annex 7: Financial Management and Disbursement Arrangements ARGENTINA: Basic Protection Project

1. This annex contains the results o f the assessment o f 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 o f the entities responsible for implementing project.

2. The assessment was performed in l ine with OP.BP10.02 and guidelines issued by the Financial Management Sector Board (FMSB) on November 3,2005. I t s 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 intended purposes in an efficient and economical way; (ii) enable the accurate recording o f all transactions and balances relating to the project; (iii) facilitate the preparation o f regular, timely and reliable financial statements; including Interim Financial Reports (IFR); (iv) safeguard the program’s assets; and (v) include auditing arrangements acceptable to the Bank.

3. The overall conclusion o f the assessment i s that the project’s implementing agencies, MTESS and ANSES under the coordination o f 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 Report28 was published in March 2008 provides a diagnostic o f Argentina’s public financial management (PFM) systems and practices. I t s main findings are that the PFM systems are well designed and underpinned by a strong legal framework and the availability o f human resources with sufficient technical skil ls. These systems enable control o f the budgetary resources received by the Government from all sources. Furthermore, they provide sufficient information to determine whether funds are used in accordance with their objectives. The report further indicates that the introduction o f the National Integrated Financial Management System (SIDIF) and the associated expenditure execution systems adopted in the decade preceding the financial crisis o f 2001-2002 represented a significant accomplishment for the public administration. Each spending unit manages i t s 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 i s s t i l l operating below expectations. Limitations in the legislative oversight o f the budget execution, the tendency to adopt exceptional rules instead o f already established standards and the lack o f a risk-oriented external audit approach are

Argentina Country Financial Accountability Assessment; Report No. 39228-AR.

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some o f the factors affecting P F M performance. With regard to the social security sector in which the proposed project will be implemented, the C F A A indicates that the P F M risk can be considered moderate at the National Public Administration (NPA) and social security institutions that are included in the 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 in public procurement. The financial management aspects o f the FM the Plan aim at: i) improving timeliness o f 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 a im 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.

INSTITUTIONAL ARRANGEMENTS FOR FINANCIAL MANAGEMENT

8. A detailed description o f the project and o f 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 Family Allowances program (Component 2). In addition, i t s 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 o f 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 in implementing projects supported by the Bank.

9. The overall coordination o f the project will be the responsibility o f 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 i t s coordination role, it will be responsible for executing the FM responsibilities o f the project, including maintaining the accounting records, preparing financial reports, managing the f low o f

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funds from the Bank to the bank account to be used for the project, and ensuring that audit arrangements are properly carried out.

RISK ASSESSMENT AND MITIGATION 10. Financial Management risk i s assessed in order to ensure that, to enable the Bank to make decisions on the appropriate level o f assessment and supervision intensity and to enable FM resources to be allocated in a manner consistent with assessed risks.

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 intended purposes in an efficient and economical way; to ensure that funds are properly managed and f low smoothly, adequately, regularly and predictably to implementing agencies 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 o f 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 implying a huge number o f monthly payments. A number o f controls have been designed into the project in order to address this risk. These include the preparation o f 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 measures that address the identified risks reduce the overall residual risk to Moderate.

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Table A7.1. Risk Assessment and Mitigation Measures

Risk Residual Risk Risk Mitigating Measures Rating (*)

Condition

Entity

Inherent Risk Country Level

Moderate

Moderate

Substantial

This features number of transactions and beneficiaries spread over a wide eo ra hicalarea

Moderate

Moderate

Control Risk Budgeting

predominantly used for payments to beneficiaries. Family allowances will be paid directly by the implementing agency. Payment processes will be the subject of internal inspections and external audit. - Existing information systems will be used to generate financial reports on a regular basis. I n addition to the normal audit carried out by the AGN, a concurrent audit will specifically examine the controls and procedures used for making payments.

Accounting

Internal Control

Funds Flow

Large number and wide geographical distribution of beneficiaries

Financial Reporting

Auditing

Special features of the operation may affect the issuance o f timely audit

The moderate risk re f lec ts strong legal and institutional framework for PFM while acknowledging some perceived weaknesses that are addressed in ongoing government reform programs Implementing entities continue to benefit from efforts supported by the Bank to strengthen their systems - A concurrent audit will examine the eligibility of beneficiary payments. - Internal oversight will regularly be exercised to ensure that

Moderate -National rules will be used for budgeting, and allocations will be - - I reflected in the SIDIF System

I - The UEPEX system, linked to the Moderate SIDIF, will be used to record al l

system, and controls over payments to beneficiaries have been strengthened in the recent past Expanded scope of

I audit on beneficiary database- I - Bank debit cards will be Substantial

opinion. Overall Residual Risk rating

No

No

No

No

No

N o

N o

Legal clause

Moderate

PROGRAM STRENGTHS AND WEAKNESSES

13. Strengths: Both implementing agencies have substantial experience in implementing World Bank supported projects and their existing internal control

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framework will be used for 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 f low mechanism. However, appropriate mitigating actions have been proposed 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 i s generally adhered to. Family allowances and pension payments are included in the annual budget o f the MTESS and ANSES.

ACCOUNTING POLICIES AND 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 o f 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 o f 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.

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19. The project’s financial and accounting transactions will be managed using already 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 Interim Financial 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 i t s information needs. The reports are generated using the budget execution information in the SIDIF system and consolidate the results o f a l l 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. In addition, the reports will include non-financial information on the project implementation progress.

INTERNAL CONTROLS AND INTERNAL AUDIT 21. The internal control environment to be used for the project i s 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 o f 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 i s reliable; (iii) applicable laws and regulations are complied with; and (iv) assets and records are safeguarded. The use o f the national SIDIF system, with i t s inbuilt controls that ensure proper authorization o f transactions, contributes to the observance o f these controls.

22. In recent years, the Government has undertaken reforms to strengthen the 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 V I - 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 o f 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-depth transformation o f the National Social Security Administration (ANSES) with a Technical Assistance Project (Loan 41 3 1 -AR). This operation successfully supported the implementation o f significant institutional reforms which have enhanced the agency’s management capacity, coverage and service delivery. I t specifically allowed ANSES to adopt controls to reduce fraud and enhance transparency in the granting o f benefits. A

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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 I C T 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 o f i t s payments directly 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 i s an internal pol icy 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 f i le (Expediente) that indicates al l 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. Fol lowing a review o f the f i l e 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 o f the Nation (SIGEN) i s 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 i t s 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 al l agencies, approves their audit plans, conducts research and independent audits, systematizes the information f rom i t s 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 IAU within 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 o f follow-up by ANSES in response to observations made by external auditors. The IAU will prepare reports on their reviews. The Bank will review these as part o f their supervision.

FLOW OF FUNDS AND DISBURSEMENT ARRANGEMENTS 30. The National Administration o f Social Security (ANSES) i s part o f the National Public Administration (NPA), and thus i t s expenditure’s execution process i s included in SIDIF but legally (Article 38 o f Law 24447) excluded from the Single Treasury Account (CUT). The C F A A 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 o f total ANSES expenditures) i s made in close coordination with the National Treasury.

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Arrangements for Components 1 and 2:

23.5%

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 f low to a DA in dollars to be opened in Banco 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

24%

32. As per provisions o f Section B.2 o f the PAD, the Bank would make advances up to US$180 mi l l ion if disbursement indicators shown in the table below have been satisfactory met.

Disbursement Indicators

a. Average o f the monthly percentage of beneficiaries o f the SCE Program receiving Employment and Training Services of the total number o f beneficiaries o f the SCE Program, during the 6 month period preceding the date in which the Disbursement Indicator i s measured.

b. Number of beneficiaries registered in the SCE Program c. Number o f Employment Offices authorized for delivery o f Employment

and Training Services through agreements signed between the Borrower, through the Ministry o f Labor, and the respective Municipality or Province.

d. Average o f the monthly percentage o f payments made through SUAF o f the total payments made under the AF Program to salaried workers in the private sector during the 12 month period preceding the date in which the Disbursement Indicator i s measured.

Baseline 7

18* I 2oo

58.7% 1 62.8%

Values Second

Set

26%

100,000

23 0

67.4%

33. In addition, retroactive financing will be requested for payments o f eligible expenditures made by the Borrower not more than one year before the expected date o f 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 o f 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.

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35. Component 2 would finance a portion o f 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 o f 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 i s envisioned that the Bank finds will cover 35 percent o f 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 wi l l be deposited in the D A managed by DNPOIC. Payments for eligible expenditures incurred will be made from an operative bank account in local currency under control o f the MTESS.

Figure A7.1. Components 1 and 2 Flow o f Funds

1

Account ' MEF's

& Payroll taxes Account (AR$)

through National Budget System

- Managed

D. Account US$ BNA DNPOI- MEF

account (SI DI F)

accounts (SI D I F)

Beneficiaries' of C1- bank Beneficiaries' [ accounts J [ of C2- SUAF bank J

naanirnts

38. New Policy Framework on Eligibility o f Expenditures in World Bank Lending applies for this project since the country's financing parameters for Argentina have been approved.

39. The DNPOIC wi l l request the access to the Bank's Client Connection webpage to perform the periodic reconciliation between i t s own registries and the Bank disbursement records.

40. Loan proceeds would be disbursed against the following expenditure categories:

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Table A7.2. Disbursements per Expenditure Category

(2) SCE Grants and AAFF Grants (3) Goods, Non-Consultant Services,

173,875,000 100% 5,000,000 100%

Consultants’ Services and Operating Costs for Part I11 of the Project -

(4) Front-end Fee 1,125,000 (5) Premia for Interest Rate Caps and Interest Rate Collars TOTAL AMOUNT

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 both programs.

0

450,000,000

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 in accordance 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 al l 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 submitted to 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 in the audit report, but did not materially affect the financial statements and unqualified audit opinions were issued.*’

Loan 7369-AR Unqualified opinions on financial statements, SOEs and Designated Accounts for 2006 29

and 2007.

80

45. The audit TOR will also comprise a review o f the beneficiary databases o f 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 o f the legal agreement and a management letter identifying any internal control weaknesses and areas for improvement.

Action

SUPERVISION PLAN

Responsible Entity

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 o f 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 plan may be adjusted by the assigned F M S according to project’s fiduciary performance and updated risk.

I 1. Finalize Administrative Section o f Operational Manual which w i l l include inter alia:

a) Chart o f accounts; b) TORS for external audit c) d) e) Administrative procedures;

IFR format agreed with the Bank; Format o f the Annual Financial Statements

PENDING STEPS

49. and were completed by Negotiations.

The following actions were identified as pending steps during project preparation,

Table A7.3. Financial Management Action Plan

DNPOIC

Completion Date

Completed

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Annex 8: Procurement Arrangements

ARGENTINA: Basic Protection Project

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 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 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 in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement implementation: For Component 3 (Technical Assistance) the Undersecretary of Labor Studies o f 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 f i rms) with the collaboration o f the Central Executing Unit (UEC) of Employment Secretary, who will assist them in the procurement o f goods.

3. Procurement of Works: N o c iv i l works are expected under the Project.

4. Procurement o f Goods: Goods procured under this project would include: computer and networking equipment, plotter and furniture. These goods will be procured using national competitive bidding (NCB) procedures for contracts estimated to cost less than US$500,000 equivalent, international competitive bidding (ICB) procedures for contracts above this threshold, and through shopping when the individual cost o f the items i s less than US$lOO,OOO. The procurement will be done using the Bank's SBD for al l I C B and National SBD agreed with or satisfactory to the Bank.

5. Procurement of non-consulting services: All contracts for services not related to consultant services (organization o f seminars, workshops, printing services) may be procured under the same methodologies and thresholds specified for goods.

6. Selection o f 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 pi lot 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 procured using Bank's Guidelines for the hiring o f consultants.

7. For consultant f i rms, 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 l i s t o f consultants in contracts estimated to cost less than US$500,000 equivalent, per contract, may be comprised entirely o f national consultants, in accordance with the provisions o f paragraph 2.7 o f 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 in the Operations Manual.

ASSESSMENT OF THE AGENCY’S CAPACITY TO IMPLEMENT PROCUREMENT

11. Procurement activities will be carried out by Undersecretary o f Labor Studies o f the MTESS through the Coordination o f 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 implementing the project and the coordination among the different institutions that would be participating in the 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 joint ly with the proposed design to be carry out and (iv) the difficulties during implementation procurement processes during the last year by the UEC o f Employment Secretary under 2 other Bank financed operations within the Ministry o f Labor (MTESS) (7474-AR and 7369-AR).

14. To address these, the following measures have been agreed upon: (i) the CPyPE would hire a procurement consultant knowledgeable o f Bank procurement policies and procedures (with a minimum o 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) define and submit the procurement plan for the first 18 months for project implementation before negotiations.

15. The overall project risk for procurement i s SUBSTANTIAL. After considering mitigating measures, the residual risk i s considered as MODERATE.

Firms

Firms

Individuals

PROCUREMENT PLAN 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 between the 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.

- > 200 QCBS Contract = > 500 and the first two (2) contracts for each selection method

< 200 QCBS, LCS, QBS, And all contracts awarded sss. with SSS procedures

< 100 CQS 2.200 IC Al l contracts Any value sss Al l contracts

FREQUENCY OF PROCUREMENT SUPERVISION 17. In addition to the prior review supervision to 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 o f contracts signed that will be subject to Bank post review i s 1:5.

Annex A8.1. Thresholds for Procurement Methods and Pr ior Review

84

DETAILS OF THE PROCUREMENT ARRANGEMENTS INVOLVING INTERNATIONAL COMPETITION

1. Goods and Non Consulting Services

3 4 5 6

(a) List o f contract packages to be procured following ICB and direct contracting are not foreseen

7

(b) ICB contracts estimated to cost above US$1 million per contract, the f i rs t two (2) processes procured under each procurement method and all direct contracting will be subject to prior review by the Bank.

1

Ref. No.

1

2. Consulting Services

2

Description of Assignment

National Household Survev

(a) List o f consulting assignments with short-list o f international f i r m s :

Estimated cost

US$1,800,000

Selection Review Expected Comments Method by Bank Proposals

(Prior / Submission Post) Date

QCBS Prior Oct 09

(b) Consultancy services estimated to cost above US$500,000 per contract, the first two (2) processes under each selection method and al l single source selection o f consultants ( f i rms) w i l l be subject to prior review by the Bank.

(c) Short l is ts composed entirely o f national consultants: Short l i s ts o f consultants for services estimated to cost less than US$500,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

(d) Individual consultants estimated to cost above US$200,000 per contract wi l l be subject to prior review by the Bank.

SPECIAL PROCUREMENT PROVISIONS 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 N C B 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) to register; (ii) establish residence in Argentina; or (iii) enter into association with other national or international bidders as a condition for submitting bids 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 al l 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 in a 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 l i s t o f contracts signed under the project and such l i s t 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 o f procurement will not be used for the procurement o f 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 l i s ts published by 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 Protection Project

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 might have in future social safety nets strategic choices.

CURRENT IMPACTS OF SEGURO AND FAMILY ALLOWANCES 2. To assess the current impact o f Family Allowances o n social outcomes, an analysis comparing the 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 o n 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 o f gaps in results between those receiving and those not receiving allowances from 2004 to 2006.

4. O n 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 (5-1 8 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 in primary 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 limited to 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 o f 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. O n the other hand, more than hal f o f al l children with no Family Allowances are poor, and one in four are below the extreme poverty line.

Table A9.1. Human Capital Accumulation indicators, by access to AAFF benefits

4

wlo AAFF

89.9% 49.3%

106.8% 94.7%

0.8%

51.8% 51.2% 14.4%

1.52

22.4%

Indicator of Human Capital Accumulatlon

Education (Children aged 5-18) Pre-primary school enrollment, gross (%) Pre-primary school enrollment, net (%)

Primary school enrollment, gross (%) Primary school enrollment, net (%) Primary school drop-out rate (% of ages 6-12)

Secondary school enrollment, gross (%) Secondary school enrollment, net (%) Secondary school drop-out rate (% of ages 13-18)

Human capital loss (Average years per household

Health (Children aged <=18) With health insurance coverage

Poverty Children in poor households Children in extremely poor households Source: Permanent household survey 2004,2005,

2005 2006

with AAFF wlo AAFF with AAFF wlo AAFF

108.3% 82.2% 102.4% 87.5% 52.8% 49.1% 51.1% 46.9%

104.5% 106.9% 102.8% 107.9% 95.3% 94.7% 94.4% 95.0%

0.4% 1.0% 0.6% 1.9%

77.4% 67.1% 78.4% 63.0% 75.5% 65.1% 76.3% 61.8%

5.2% 13.0% 6.0% 14.4%

1.25 1.54 1.27 1.64

88.2% 24.1% 88.9% 26.7%

2

Nith AAFF

74.3% 36.5%

111.6% 49.9%

102.0% 94.2% 0.8%

61 .O% 60.3% 6.7%

1.25

88.6%

29.8% 23.0% 68.0% 19.7% 59.3% 2.9% 32.2% 1.4% 25.2% 4.3%

-C

7. While these data do not exclude other possible explanations for the differences, the evidence offered i s quite strong, in the sense that both Seguro 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 o f future expansions in coverage o f 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 in this 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 al l 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. In addition, two other scenarios were included for comparisons with other options for poverty relief, a transfer to al l poor households, and finally, Family Allowances plus pensions for the elderly in the bottom two quintiles.

Methodologies for Ex Ante Evaluation

10. The simulation exercise requires assumptions about the potential behavioral response o f beneficiaries. Although arithmetic simulations assume that pol icy changes will have a direct impact on individuals and households that participate in the 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 in school 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 in this report are arithmetic.

12. In the simulations the policy effects are assessed using a set o f 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 in the first and second quintiles, that is, the percentage o f households in these income strata receiving the transfer, and (vi) fiscal costs, in terms o f annual expenditures as a percentage o f GDP (net o f Je fes),

The Data

13. The latest microdata available are from the Continuous Permanent Household Survey for the second hal f o f 2006. The Permanent Household Survey (EPH) i s drawn from 33 urban centers with more than 100,000 citizens. Given that 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 o f 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 build the 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

30 The Moratoria was a program implemented in 2006-2007 that granted retirement benefits to nearly 1.7 million older citizens who did not have adequate contribution histories for the pension system.

90

was updated to consider the likely impact o f the Moratoria. In the case o f Familias and Seguro, no corrections were possible.

15. The adjusted baseline for 2007 i s 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 o f beneficiaries obtained from administrative sources. This includes 80 percent o f women and men (minimum ages 60 and 65, respectively) without pension coverage, and 20 percent o f 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 if Jefes were to be eliminated. Table A9.2 shows the relevant indicators for the original baseline, the adjusted baseline (that is, including the Moratoria), and the adjusted baseline without Jefes. I t i s interesting to note that Moratoria had a positive impact on all welfare indicators, as extreme poverty, total poverty, the poverty gap, and the Gini coefficient improve when the baseline i s adjusted. However, most o f these impacts would be fully compensated if Jefes were to be simply closed with no other program to replace it. The extreme poverty, poverty gap, and Gini indicators would be worse in a scenario with Moratoria but without Jefes than in the situation at the end o f 2006.

Table A9.2. Adjusted baseline data used for the simulations

Adjusted Adjusted Baseline Baseline minus

Jefes

extreme poverty 8.6 7.8 8.9

(including moratoria)

26.4 25.0 25.8 11.0 10.2 11.2

0.482 0.477 0.482 Spending (YO o f GDP) 8.20 9.1 1 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 o f (i) universal transfers for the unemployed, (ii) transfers to poor households, (iii) Family Allowances for households with children in the bottom two quintiles, and (iv) Family Allowances plus pensions for the elderly in the bottom two quintiles. Table A9.3 presents the basic characteristics o f each scenario.

3 ' According to administrative data, a majority (90 percent) o f Moratoria beneficiaries were women. Many beneficiaries were already receiving a survivors' pension, thus resulting in a duplication o f benefits.

91

I Scenario I Description Beneficiaries Transfer

informality status 2 I Transfer to poor I All households below the poverty

1

two quintiles

Universal transfer for the unemployed

All unemployed workers, regardless o f their previous formality or

3

Family Allowances two quintiles plus

pensions not receiving pensions

Source: World Bank staff.

households line Non-contributory

Family Allowances Al l children o f families in the lowest

(A@) AR$400 per month

AR$400 per month

AR$l55 per child per month (on

average, AR$40 1 per family)

AR$l55 per child per month (on

average, AR$401 per family)

AR$270 per month

18. The potential impact o f each scenario i s 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 al l social security, Jefes, Familias, and Seguro programs).

19. The fol lowing 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 o f beneficiaries, average benefit, and value o f the six indicators are also presented.

A Universal Transfer for the Unemployed

20. The f i rst scenario i s a transfer to al l 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 al l unemployed workers. This would involve approximately 1 mi l l ion beneficiaries.

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Figure A9.1. Simulation results for a transfer to the unemployed

beneficiaries - individuals 1,049,198 ARS 400 l benefit

-baseline - Scenario I

extreme poverty Welfare indicators

extreme poverty 6% poverty 22% annual expenditure in

poverty poverty gap 9% 0.90 Gini 0.464

Program size 0.87

coverage quintiles 1 coverage quintiles 1 and 2 19% % GDP in transfers 9.66%

poverty gdP and 2 0.97

Diff with baseline (% o f GDP) 0.55%

Gini

Source; Authors’ calculations based on EPHC, and administrative data on expenditures; ANSES, MTESS, MDS.

21. The transfer to al l unemployed workers would have marginal effects on welfare. Figure A9.1 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 hal f a percentage point o f GDP.

Poverty Relief Trans fer

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 mi l l ion beneficiaries and would provide a benefit level o f AR$400 per month. Considering that the poverty l ine 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.

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Figure A9.2. Simulation results for a transfer to poor households

-baseline -Scenario II

extreme poverty

nnual expenditure in transfers ’2

3 5 p O S coverage quintiles 1

and 2

Gini

beneficiaries - households 1,198,646 benefit ARS 400

Welfare indicators

extreme poverty 2% poverty 15% poverty gap 4% Gini 0.44 1

Program size

coverage quintiles 1 and 2 44% % GDP in transfers 9.77% Diff with 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 f i rst 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 fal l f rom 10.2 percent to 4 percent, and the effect on inequality would be the most substantial o f al l 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 o f 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 much better targeted transfer than the previous one.

Famiij Allowances for Households in the Lowest Quintiles

24. Under the third scenario each family in the bottom two quintiles would receive a transfer for each chi ld 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 i s formally employed and households in the third quintile or above-would not be eligible for the benefit.

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Figure A9.3 Simulation results for a transfer to households with children under 18

beneficiaries - households 939,245 -baseline -Scenario I11 benefit per child ARS 155

Welfare indicators

3 yo

annual expenditure m poverty poverty gap 6% transfers 0.34 Gini 0.457

extreme poverty extreme poverty poverty 20%

0 I 9

3 0 0 56 Program size

coverage qumtlles 1 and 2 poverty coverage quintiles 1 and 2 3 8%

% GDP in transfers 9.58% Diff with baseline (% of GDP) 0.47%

Glnl

Source: Authors’ calculations based on 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 pol icy 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 in OECD countries.

Family Allowances Plus Pensions for Elderly People in the Bottom Quintiles

26. As mentioned, most o f 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 j o in 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 f i rst 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 in addition to the family allowances simulation o f the third scenario, which would replace Jefes as the main income transfer for younger families.

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Figure A9.4 Simulation results for family allowances and a transfer to the elderly

-baseline -Scenario IV

extreme poverty

annual expenditure in transfers 0.34

0 I 9

0 56 coverag qumtiles3 H

and 2

Gini

poverty

beneficiaries children elderly

children elderly

Welfare indicators

benefits

2,428,378 295,378

ARS 155 ARS 270

extreme poverty 4% poverty 22%

7% 0.460

Program size

coverage quintiles 1 and 2 47% % GDP in transfers 9.73% Diff with baseline (% o f GDP) 0.61%

Source: Authors' calculations based on EPHC, and administrative data 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 al l welfare indicators would have the same levels as in the previous scenario. In other words, providing universal pensions would not result in additional welfare for the population. On the other hand, coverage would be higher, at 47 percent o f 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 o f 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. Under these scenarios, perfect targeting, no errors or coverage gaps due to operational or design problems, and high efficiency in management are al l assumed. O f course, in real-world politics there are many immediate and potential problems which must be carefully considered.

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Annex 10: Social Assessment

ARGENTINA: Basic Protection Project

SOCIAL ASSESSMENT OF INCOME TRANSFERS (INCLUDING SEGURO 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 n . ~ ~ The 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 inspired the 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 o f 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 in ten provinces.34 Over 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 fol lowing a common interview guide. More information on the approach o f the consultations i s included in Appendix 2. 4. The National Opinion Survey, the Encuesta de Percepcidn de Planes Sociales (EPPS), was conducted between mid-June and mid-August, 2007.35 It was undertaken by 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, depending on 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-

32 The findings o f the consultations and survey are summarized in Argentina: Income Support Policies towards the Bicentennial, Report No. 44194-AR The World Bank: Washington, DC. 33 The findings from the consultations are synthesized in Bonvecchi and Smulovitz, 2007. 34 The provinces are: Buenos Aires, Corrientes, Chaco, Chubut, Mendoza, Misiones, Rio Negro, Salta, Santa Fe and Tucuman. 3 s The findings from the EPPS are synthesized in Cruces, Rovner and Schijman, 2008.

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sample was based on self-reported income. The survey questionnaire included a sub- module for the over-sample which included specific questions relevant to the beneficiary population on adequacy o f benefit amounts, contraprestaciones, the duration o f programs, and views regarding training and other forms o f 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 o f those interviewed mentioned Jefs (Figure A l 0. l).36 A large share o f the population (61 percent) also mentioned Trabajar, the predecessor to Jefes which was discontinued in 2001, suggesting recognition o f the plans, but less familiarity with recent developments. These findings illustrate the widespread familiarity with the emergency programs - especially Jefes- because o f the high level o f 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 o f interviewees mentioned Seguro spontaneously. When prompted with a list o f programs and asked which were familiar, the number o f respondents indicating familiarity increased to 42 percent. Similarly with Familias, only 4 percent mentioned the program unprompted, while 55 percent recognized i t from a l ist . These findings are not surprising, given that the programs are not yet fully implemented across the country.

Figure A1O.l. Familiarity with Social Programs (spontaneous and guided responses)

Plan Jefesy Jefas de Hogar Desocupados

Plan Trabajar

Plan Familias

Seguro de Desempleo

Seguro de Capacitaci6n y Empieo

Fam i liar I U nfami liar

Source: Calculations based on EPPS (CEDLAS-MORI-BM, 2007). Base: total sample.

8. Beyond basic name recognition, the survey also asked respondents about their knowledge o f the eligibility criteria for participation in the programs. The findings

36 Spontaneous response plus guided (interviewee was asked to select programs from a list); 62 percent mentioned Jefes spontaneously.

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indicated a relatively broad knowledge o f basic characteristics o f 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 requirement for receiving benefits.

9. A significant share o f the population has had direct experience with social programs, again reflecting the high coverage o f Jefes. In the EPPS, 20 percent o f 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 o f coverage i s reflective o f the peak level o f coverage reached by Jefes in 2003. O f this 20 percent, 82 percent reported a monthly income below AR$1,249 - the level o f median total family income at the time o f the survey. On the other hand, 12 percent o f 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)

14% Have you ever had one of these plans which give money monthly?

Has your spouse had any of these plans which give money monthly?

And has any other member of your family had one of plans which give money each month?

Have you or any member of your household ever been offered a plan and not accepted it?

Have you or any member of your household sought out or requested a plan and didn‘t

receive it? Have you ever considered enrolling in a plan? (Base: Those interviewed who weren’t part of a

plan and whose spouse wasn’t either) 14%

Source: Calculations based on 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 asked whether to “leave the programs as they are” or “eliminate them without replacing them,” half o f 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 i s a large share o f 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 o f the programs appears to decline with age. Among those between 18 and 35 years old, 19

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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%

1

Eliminate the plans and don’t replace

: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 needed because 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 in the 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) o f 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, l o w benefit levels, and lack o f information about eligibility.

Poverty, unemployment and inequality were separate (not mutually exclusive) choices in the question 37

100

Figure A10.4. General Evaluation of Programs (agreement with the statement: “the programs work well and should be left as they are”)

Doesn‘t know/No answer Agree + strongly -. ._ . . - .

agree 21%

Neither agrees or

Disagree +

58% ‘ strongly disagree,

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 o f provincial level programs.

15. In terms o f the overall evaluation o f the programs, 35 percent o f beneficiaries reported that they believed that their quality o f l i f e had improved f rom participating in the program, and 26 percent maintained that their potential to get a j o b had improved. The majority reported that both their quality o f l i fe 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 l i f e 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 o f f benefits was getting a j o b (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

38

38 Provincial programs mentioned included: Plan Bonarense, Fondo de Desempleo, Plan Vida, Vale lo Nuestro, and Plan Primer Paso y Plan Medicamentos.

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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.

Figure A 1 0 5 Reasons for Exiting Benefit Programs

I really don't know why, they just stopped giving it to me

I t was suspended

The program ended

I didn't need it any more I was asked to retire and they stopped giving

it to me/I retired I didn't fulfill the requirements because of the

children's age I couldn't complete the "contraprestacion"

because of illness The recipient died

I didn't carry out the contraprestacion

I stopped participating in "piquetes" Move (the person who gave it out or the

beneficiary) Other

16%

16% - 8% - 7%

5%

1%

1%

1%

1%

1%

Source: Calculations based on EPPS (CEDLAS-MORI-BM, 2007). Base: Respondents who had received (or whose spouse received) a benefit in the past.

Program Design

18. Public opinion cannot determine the design o 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 intersection between income 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 in the 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 high because o f the incorporation o f contraprestaciones into the Jefes program. Proponents o f a l l 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).

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20. Support for conditionalities attached to benefit receipt was nearly the same within the EPPS survey. Ninety three percent o f interviewees agreed that beneficiaries needed to “do something in exchange for receiving benefits.” When asked about preferences regarding the type o f 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 in a 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 o f 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)

Check children’s school attendance

Regular health checks for children

Attend employment training

Participate in some community organization (feeding program)

Finish primary or secondary school

Actively seek work

None of the above

Work for a political organization

Care for a disabled spouse

55%

Source; Calculations based on EPPS (CEDLAS-MOM-BM, 2007)). Base: Respondents who had received a benefit and participated in some form o f contraprestacidn.

22. Views regarding targeting did not converge as clearly as for contraprestaciones. Most stakeholders expressed a preference for universal programs in the consultations, but recognized that some level of targeting was necessary because o f resource constraints. Proponents o f the rights-based vision support a basic universal citizen’s benefit, while supporters o f the other two visions expressed the need for some form o f targeting. The EPPS survey also indicated support for some level o f targeting. When asked which criteria should be applied in determining eligibility for support, the most common

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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 i t would mean that some people in need would be l e f t out. In contrast, 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 o f 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 a n d $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 o f 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 o f 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 in taxes (79 percent). These sentiments signal an awareness o f the tradeoffs that income support policies entail.

39 Multiple responses were allowed for this question

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26. Respondents also indicated a preference for receiving benefits in cash, 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 preferred that 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 o f 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).

Figure A10.8. Opinions on Form of Benefits

They should give more They should only give Families should receive Plans should also be money to families with

more children residents who need one plan per family plans for a limited time given to foreign

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 o f 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 chi ld 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).

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Figure A10.9. The choice between Jefes and Hypothetical Programs (FarniliasLSeguro)

A plan which pclys $225 per month, offering trohing and access to employment agencies for a

madumum of two years 72 %

A plan that pays $125 per month, plus $25 for each child, with no obligatory work inthe commurliy

Plan Jefes, with the same conditionolles as now ($150 per month for working h the commvn

an as yet undetermined period)

Source; Calculations based on EPPS (CEDLAS-MOW-BM, 2007). Base: Sub-module.

29. In order to explore this question o f 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. O n the other hand, respondents expressed a preference for lower benefits in exchange for training, access to employment services (bolsas de trabajo), or a concrete j o b 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 1 0.10). Respondents prefer programs which wil l provide tangible benefits in the labor market, even if it means receiving a lower transfer amount. At the same time, the responses indicate a preference for higher benefits even if they 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 l ikely to prefer employment-related benefits. Multivariate analysis found that respondents in the poorest regions o f the country, young people and those with l o w levels o f education were more l ikely to choose the policy scenarios linked to labor market entry (training, employment services, or a j o b offer). On the other hand, respondents from households which had recently received benefits and residents in large cities were more

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likely to opt for program scenarios with a larger benefit amount.. Finally, women respondents were more likely to choose programs promising training.

Figure A1O.lO. Preferred Characteristics of Social Programs (sub-module)

If a secure job will be dfered when the plan ends 65%

If employment training is offered during the plan 38%

How long the plan lasts 32%

1 If health and schod certificates should be

presented in exchange 28%

The amount of hours per day that should be worked in exchange 23%

First option

Total mentions Doesn‘t know/No answer

Source: Calculations based on EPPS (CEDLAS-MOM-BM, 2007). Base: Submodule.

Conclusions

32. The general consensus in Argentina i s that the current income support programs are important.40 Less than 30 percent o f 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, 4 1 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 enough to satisfy the existing demand for social policies.

40 Two instruments were used to assess the population views: first, over 300 consultations with stakeholders at the provincial level, and second, a national opinion survey (EPPS). Both are discussed in chapter 3 o f this report.

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34. A major theme emerged surrounding the link between income support programs and the labor market. While there i s 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 EPPS) for contraprestaciones, or for some form o f conditionality to be included in the design o f 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 i t would mean a lower benefit amount or duration o f eligibility. This finding indicates support for the type o f program the government i s currently introducing: the Seguro de Capacitacidn y Empleo. Also, it suggests that other programs, such as Familias, could be adapted to incorporate more o f a labor market orientation, for example, through the introduction o f training opportunities or work requirements.

SUMMARY OF INDIGENOUS PEOPLES PLANNING FRAMEWORK4’

36. The legal framework in Argentina i s established by the Constitutional Reform o f 1994 in i t s Ar t ic le 75 where it guarantees respect for the cultural identity o f Indigenous peoples and their right to a bilingual and inter-cultural education: recognition o f the legal status o f their communities; and the communal possession and ownership o f traditionally- held lands. I t also establishes the need to ensure their participation in the management o f natural resources. Argentina has ratified the International Labor Organization Convention 169.

37. following:

The main legal regulations at national level on indigenous’ rights are the

0 Law No 23,302 on Indigenous Policy and Support to the Indigenous Communi ti e s .

0 Law No 24,071 ratifying o f Agreement No 169 o f the International Legal Organization on Indigenous and Tribal in Independent Countries. This Agreement promotes the respect by the cultures, l i f e forms, the traditions and the right o f indigenous and tribal. Law No 24,375 Agreement o f biological diversity Regulation o f the National Institute o f Indigenous Issues (INAI) No 481 1/96, that it establishes requirements for the inscription o f the Indigenous Communities in the National Registry o f Indigenous Communities (RENACI). Resolution INAI No 152/2004 and i t s modifying No 301/2004 that establishes the Council o f Indigenous Participation (CPI)

0

0

38. Estimates o f the size o f the Indigenous population in Argentina vary from 400,000 to 1.5 million. In the 2001 Population Census, 2.8 percent o f households included at least one person who recognized themselves as Indigenous. Provinces with

4 1 This annex presents a summary o f the IPPF presented by the Borrower in Spanish.

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the highest proportion o f 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 o f Indigenous households have unmet basic needs, compared to 14 percent for all households in Argentina. Only 10 percent o f the Argentine population lives in rural areas, but the share i s 16.5 percent for the Indigenous population.

39. Among the Indigenous population older than 10 years, 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 secondary education, while a third have not completed primary. This compares with shares for the population as a whole o f 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 o f OP 4.10, as per the criteria o f OP 4.10 are1 12 municipalities in 14 provinces, listed in Annex I o f the Indigenous Peoples Planning Framework (IPPF).

41. The proposed project wi l l target participants currently in the Seguro de Capacitacidn Empleo Program. The location o f activities for Seguro depends on the location o f 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 municipalities o f the 112 mentioned in the preceding paragraph. There i s not sufficient information to know the extent to which indigenous communities participating in the Seguro would be present in those municipalities.

42. In addition, it i s expected that more municipalities wi l l be included in the Seguro during project execution, and they might also trigger OP 4.10 ( as they might be included in the 112).

43. The Ministry o f Labor i s committed to assisting indigenous peoples and encouraging their participation as project beneficiaries through a number o f specific actions aiming at including and reaching out to this sector o f the population. For example, The Ministry o f Labor has for Seguro prepared bilingual materials to inform indigenous communities in Formosa, allowed for Community (as opposed to individuals) participation o f Mapuches in Neuquen, and organized a gathering o f concerned stakeholders at the request o f Diaguitas in La Rioja.

44. The project wi l l build on the experience o f 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 wi l l 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 o f Labor made presentations on the Seguro program to members o f the Indigenous Participation Council o f INAI, and to the communities of Diaguita, Calchaquis and Lules in the province o f Tucuman, as well as Toba and Mocovis Communities in Chaco. These presentations aimed at providing

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information on Seguro activities, promoting the participation o f Indigenous communities in i t s implementation, and receiving suggestions on the IPPF and the Project. During the implementation o f the ABP Project, the consultations and collaboration among the Ministry o f Labor, INAI, the Indigenous Participation Council and Indigenous Provincial Institutions wi l l continue with to ensure that IPPs are properly designed and implemented, with the aim o f improving the efficiency and cultural appropriateness of the specific activities o f the Project in order to increase the levels o f schooling and ski l ls within Indigenous 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 o f surplus agricultural products and use o f machinery. These suggestions wi l l be incorporated in the IPPs.

47. Given the nature o f 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 o f the Ministry o f Labor wi l l be used, operating through the provincial offices o f the Secretariat o f Employment (Offices o f Employment and Professional Training).

General guidelines for the social assessment

48. The Social Assessment on Indigenous Populations which each identified province or municipality would carry out according to Annex A o f the OP 4.10, will contain the following:

Demographic characteristics: age, sex, urbadrural, gender, migration. Educational and occupational characteristics, including people that could be beneficiary o f Seguro Grants.

General guidelines for the preparation of Indigenous Peoples Plans (IPPs)

49. The preparation o f the provincial or municipal plans will incorporate specific cultural appropriate strategies o f promotion and communication adequate for Indigenous communities in order to guarantee their full understanding o f the project. In particular, the following i s envisaged: (a) the use o f existing material in the original language; (ii) training o f 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 o f 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 i t s 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 o f the IPPs, taking advantage o f their experience in responding to needs and demands o f 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, wi l l participate and monitor the implementation o f the IPPs. This monitoring and supervision strategy wi l l ensure the implementation o f an appropriate intercultural approach for indigenous communities. Financial resources, when necessary, will be provided by the MTESS. The preparation and implementation o f the IPPs by the Government (including the necessary inter institutional agreements), satisfactory to the Bank, are considered eligibility criteria o f Seguro Grants to residents o f those provinces or municipalities.

5 1. These mechanisms wi l l ensure the implementation o f an appropriate intercultural approach for indigenous populations. In addition, the Technical Project Coordination Unit o f Seguro in the Ministry o f Labor, as well as Bank staff, will monitor the implementation o f the IPPs during Project implementation.

111

Annex 11: Project Preparation and Supervision ARGENTINA: Basic Protection Project

~~~ ~ ~ ~ ~~

Planned Actual PCN review 01/30/2009 0 1/30/2009 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 Planned date o f effectiveness 06/16/2009 Planned date o f mid-term review N / A Planned closing date 09/30/20 1 1

Key institutions responsible for preparation o f the project: Ministry o f Labor Bank staff and consultants who worked on the project included:

Name Title Rafael Rofman Lead Social Protection

Helena Ribe Hermann von Gersdorff Dena Ringold Juan Martin Moreno Vanina Camporeale Marcela Salvador Carla Bonahora

Santiago Scialabba Marta Molares-Halberg Ana Grofsmacht Alejandro Solanot

Ricardo Schusterman Paloma Anos Casero Isabel Tomadin

Specialist Sector Manager Sector Leader

Senior Economist Social Protection Economist

Operations Officer Social Protection Consultant

Junior Professional Associate

Program Assistant Lead Counsel

Procurement Specialist Financial Management

Specialist Consultant on Social Issues

Country Economist Social Development

Unit LCSHS

LCSHS LCSHD LCSHS LCSHS LCSHS LCSHS LCSHD

LCSHD LEGLA LCSPT LCSFM

LCSSO LCSPE LCSHS

Bank funds expended to 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. Estimated annual supervision cost: TBC

112

Annex 12: Documents in the Project File ARGENTINA: Basic Protection Project

1. Argentina Heads o f Household Program, Project Appraisal Document (July 2002).

2 . (February 2006).

Argentina Heads o f Household Transition Project, Project Appraisal Document

3, Argentina Lifelong Learning Project, Project Appraisal Document (May 2007).

4. A Review o f Programs in Latin America and the Caribbean, World Bank (March 2007).

Control and Accountability Mechanisms in Conditional Cash Transfers Programs,

5 . Perspectivas, World Bank (October 2008).

Los Programas Sociales en Argentina hacia el Bicentenario, Visiones y

6. (December 2008).

Argentina: Income Support Policies toward the Bicentennial, World Bank

7 . politica social, by Alejandro Bonvecchi and Catalina Smulovitz (December 2007).

Atender necesidades, crear oportunidades o garantizar derechos. Visiones sobre la

8. Helena Rovner and Agustina Schijman (February 2008).

Percepciones sobre 10s Planes Sociales en Argentina, by Guillermo Cruces,

9. by Alejandro Bonvecchi (May 2008).

Condiciones para politicas sociales subnacionales autonomas en paises federales,

10. Finance (March 2009)

Marco de Planzjkacidn para Pueblos Indigenas. Ministry o f Economy and Public

113

Annex 13: Statement of Loans and Credits ARGENTINA: Basic Protection Project

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project ID FY Purpose ~~

IBRD IDA SF GEF Cancel Undisb Orig Frm Rev’d

PI01171 P 106684 P106752 PI IO462

PI00806 PO95569 PO90993 PO955 15 PO95514 PO9905 1 PO99585 P101170 P105288 PO55483 PO60484 PO70448

PO70963 PO93491 PO92836 PO89926 PO70628 PO88032

PO88220

PO71 025

PO88 153 PO06043 PO06041 PO39584 PO06010

2009 2009 2009 2009

2008 2007 2007 2007 2007 2007 2007 2007 2007 2006 2006 2006

2006 2006 2006 2006 2005 2005

2005

2004

2004 1999 1998 1997 1997

AR SOC&FISC NTL ID SYS 11 AR 2nd Prov. Agric Dev AR Unleashing Productive Innovation AR Mining Environmental Restoration Project AR Sustainable Natural Res Mgt AR APLZ National Highway Asset Mgt

AR-Essential Public Health Functions AR (APL2) Prov. Maternal-Child Health AR Lifelong Learning Project AR- SANTA FE ROAD Infrastructure AR-Cordoba-Road Infrastructure AR 2nd State Modernization AR APL2 Buenos Aires Infrastructure AR-Heads of Household Transition Project AR Basic Municipal Services Project AR Subnational Gov Public Sec Modernization AR Rural Education Improvement Project AR (APL2) Urban Flood Prev..& Drainage AR Inst. Strengthening - ANSES I1 TA AR Solid Waste Management Project AR-Provincial Road Infrastructure Project AR(CRL1)Buenos Aires Infrastr SDP( 1 APL) AR (APL1) Urban Flood Prevention & Drainage AR-Provincial Maternal-Child Health Inv Loan AR National Highway Asset Management AR RENEW.ENERGY R.MKTS AR SMALL FARMER DV. AR B.A.URB.TSP AR PROV AG DEVT 1

20.00 300.00 150.00 30.00

60.00 400.00 220.00 300.00 200.00 126.70 75.00 20.00

270.00 350.00 110.00 40.00

150.00 70.00 25.00 40.00

150.00 200.00

130.00

135.80

200.00 80.00

120.00 300.00 162.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00

20.00 300.00 1so.00 30.00

60.00 400.00 151.82 257.79 193.00 108.50 48.45 16.44

270.00 45.06 98.42 37.66

129.33 69.53 20.28 38.38

122.66 66.27

121.90

32.39

14.77 58.28 45.00 99.21 26.27

0.00 0.00 0.00 0.00

0.00 0.00

23.29 68.79 18.00 61.80 43.12 4.34

23,OO 45.06 27.16 23.23

60.46 69.70 11.28 17.78 95.66 61.59

102.06

20.27

14.77 8.28 0.00

-0.79 -10.73

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

29.80 0.00 0.00 0.00 0.00 0.00 0.00

-20.52 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00

6.86 0.00

-0.79 -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

Held and Disbursed Portfolio In Millions o f US Dollars

Committed Disbursed

I F C IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2000 1998 2004 2006 2000 2006 1999 2005 1997 2006 1995 1998

1998 1992 2004

1997 1993 1994 1996 1999 2006 2005 1998 1998 1999 2005 1995

1995 1997 1997 1995 2000 1995 1996 2001 2005 1993

ASF AUTCL Aceitera General Arcor BACS BACS Banco Galicia Banco Galicia Bunge-Ceval CAPSA CEPA F.V. S A Grupo Galicia Hospital Privado Huantraico Jumbo Argentina LD Manufacturing Milkaut Milkaut Molinos Molinos Neuquen Basin Neuquen Basin Noble Argentina PAE - Argentine Patagonia Patagonia Fund S A San Miguel S A San Miguel SanCor Socma Socma T61 Terminal 6 Terminales Port. Tower Fund Tower Fund Mgr Transconor USAL Vicentin Yacylec

3.76 4.28 50.00 70.00 0.00 50.00 57.79 40.00 0.00 50.00 3.00 1.50 0.00 8.40 0.00 0.00 0.00 0.00 5.33 0.00 0.00 0.00 0.00 18.00 105.50 1.76 0.00 2.76 20.62 8.70 7.00 0.94 3.33 3.33 0.50 0.00 0.00 4.20 9.27 20.00 0.00

0.00 0.00 0.00 0.00 6.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.06 0.00

27.00 39.12

0.00 1.23 0.00 2.00 0.57

26.40 5.00 0.00 0.00 0.00 8.54 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.85 0.05 0.00 0.00 0.00 2.52

0.00 0.00

20.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 4.00 0.00 0.00 0.00 0.00 5.00 0.00 9.44 0.00 0.00 0.00 0.00 0.00

15.00 1 .oo 0.00 0.00 0.00

19.89 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00

15.00 0.00

3.85 0.00

30.00 210.00

0.00 0.00

40.91 0.00 0.00

20.00 1.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.44 0.00 0.00 0.00 0.00

18.00 135.00

0.00 0.00 0.00

10.00 0.00 0.00

15.00 3.75 1.63 0.00 0.00 0.00

157.58 0.00 0.00 0.00

3.76 4.28

50.00 70.00 0.00

13.25 57.79

5.00 0.00

50.00 3.00 1.50 0.00 8.40 0.00 0.00 0.00 0.00 5.33 0.00 0.00 0.00 0.00

15.00 103.53

1.76 0.00 2.76

17.29 8.70 7.00 0.94 3.33 3.33 0.50 0.00 0.00 4.20 7.27 0.00 0.00

0.00 0.00 0.00 0.00 6.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.06 0.00 0.00

39.12 0.00 0.00 0.00 2.00 0.57 0.00 0.00 0.00 0.00 0.00 1.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.00 0.00 0.00 2.52

0.00 0.00

20.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 4.00 0.00 0.00 0.00 0.00 5.00 0.00 9.44 0.00 0.00 0.00 0.00 0.00

15.00 1 .oo 0.00 0.00 0.00

19.89 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00

15.00 0.00

3.85 0.00

30.00 210.00

0.00 0.00

40.91 0.00 0.00

20.00 1.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.44 0.00 0.00 0.00 0.00

15.00 135.00

0.00 0.00 0.00 8.33 0.00 0.00

15.00 3.75 1.63 0.00 0.00 0.00

157.58 0.00 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 Banco Rio TFF 0.02 0.00 0.00 0.05 2005 Vicentin Exp. 0.00 0.00 0.00 0.05

Total pending commitment: 0.05 0.00 0.00 0.12

116

Annex 14: Country at a Glance

ARGENTINA: Basic Protection Project

Argentina at a glance W27D9

Key Deve lopmen t I n d i c a t o r s

(20071

Population. mid-year (millions) Surface area (thousand sq. km) Population grodh (%) Uban population (% oftotal pgxllation)

GNI (Wlasmethod. US$ billions) GNI per capita (Atlas methal, US$) GNI per capita (PPP, intemationd $)

GDP gum (%) GDP percapita QrChyth (%)

(m& recent estimate, 2 0 ~ 2 0 0 7 )

Poverty headcount ratio at $1 2 5 a day (PPP, 96) Povertyheadcountratioat $Z.OOaday(PPP, %) Lfe ewectwcy at birth (yean) Infant moital%y(per 1,000 live births) CMld malnutrilon (% of children under 5)

Pddt literacy, male (%of ages 15 and older) Pdult literacy, female (% of ages 15 and older) Grossprimaryenrollment, male(%ofagegmup) Gross primaryerrollment, female (%of age NOW)

Access lo ~n imp-oved water s w c e (%of population) Pccess to improved s W a l o n facilities (W of population)

Argenlna

39.5 2,780

0.9 92

238.9 6,050

12,990

8.7 7.6

75 14 2

97 97

113 112

96 91

Latin Upper America middle &Carib. illcome

563 823 20,421 41,497

1.2 0.6 78 75

3,118 5.750 5,540 6.987 9,320 11.868

5.7 5.8 4.5 5.1

8 18 73 70 22 22

5

91 94 89 92

120 112 118 109

91 95 78 83

Net Aid Flom

(US$ mi//ions) Net ODA and ci3cid aid Top 3 donors (in 2 W ) :

H d Y European Cmmission France

A d (%of GNI) A d per capita (US$)

Long-Term Economic Trends

Consuner prices(arnud 36 change) GDP implicit deflalor (annual % c h w e )

Exchange rate (annual average, local per US$) Terms of trade index (2OW 100)

Population micLyear (millions) GDP (US$ miiiions)

Agriculkire Industry

Services

Household final consumption expendhre Gened gob4 final msumption expendibm Gross capital formation

Exports of goods and services Imports of @xds and swices Gross savings

MmufactUlng

1980

19

1 0 1

0.0 1

100.8 90.8

0.0

28.1 76,962

6.4 41.2 29.5 52.4

63 0 1 1 0 25.3

5.1 6.5

22.9

1940 2000

169 53

82 -12 2 10 6 8

0.1 0.0 5 1

2314.0 -0.7 2.076.8 1.0

0.5 1.0 85 100

32.6 36.9 141,352 284.204

(% of GDP) 8.1 5.0

36.0 27.6 26.8 17.5 55.9 67.4

77.1 70.7 3.1 13.8

14.0 16.2

10.4 10.9 4.6 11.5

13.4 13.0

2007 '

114

27 25 16

0.1 3

8.6 14.1

3.1 114

39.5 262,331

8.4 35.6 22.3 56.0

53.6 12.4 23.5

24.7 19.2 26.8

Age distributiar. 2007

Male Female

75-19

6044

45d8

3044

1618

0 4 10 5 0 5 10

percent

Jnder-6 mottalityrate (per 1,000)

OArgentina ULabn America d h e Canbbem

Orowth of GDP and GDP per capita (%)

I 5 -

-0-GDP - GDP per capita

198WO 1990-2UOO 200047 (averaw annud growth %) 1.5 1.2 1.0

-0.7 4.3 4.7

0 7 3 5 3 0 -1 3 3 8 5 3 -0 8 2 7 5 0 0 0 4 5 2 4

2 7 2 2 2 2 1 3

-5 2 7 4 9 2

3 8 8 7 7 0 -5 8 156 5 0

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.

Development Economics, Development Data Group (DECDG).

117

Argentina ~ ~~

Balance of Payments and Trade

(US$ milhons) Total merchandise exwlts (bb) Total merchandise impats (cf) Net tade in goods a d services

Wakers'remlttances and compensation of empiopes (recapts)

Current account balance as a % of GDP

Reserves including @d

Central Government Finance

(%of GDP) Current revenue (induding grants)

Current expenditure

Overdi surpiuskiefcit

Highest marginal tax rate (Oh)

Tax revenue

lndivid ual Caprate

External Debt and Resource Flows

(US$ milhorn) Total debt Wlstandlng and disbursed Total debt secvice Debt relief (HiPC MDRO

Total debt (% dGDP) Total debt sewice (% of expats)

Fweign dired invesbnent (net inflows) Poltblio equity (net inflows)

2000 2007

26,341 52,238 25,281 43,700 -1,832 12,937

86 M)2

-8,981 6,246 -3.2 2.4

25.147 14,153

19.4 24.2 11.3 17.3 20.9 19.9

-2.4 1.6

35 35 35 35

144,126 122,190 26,966 18,994 - -

50.7 57.0 69.8 32.0

10,418 4,840 -3,227 662

Cornwsition of total external debt 2006

Shon4erm 35 030

JSS millions

Private Secior Development 2000 2008

Cost bstartabusiness(%dGNIpercapita) - 9.0

Ranked as a major mnstraint to business 2000 2007

Access tdcost dfinandng .. 15. 7

Bank capital lo asset ratio (%) . . 13.7

Time required b stalt a business (days) - 32

Time rewired b wister wowrtv (daw) - 51

(56 dmmagers suweyed who agreed) Emnomic and regulatory pdicy uncertdnty .. 16.5

Sock market capiklization (% dGDP) 56.4 33.0

Governanwindicaton,2000 and2007

Voice and accwntability

Polidcal stability

Regulatory quality

Rule o f IBW

Control o f curupdon

0 25 50 75 I 0 0

m2w7 Country's prcenhle rank (0-100) 02WO hrghv ! d u e s m # y brier miner

Sowm KauhnannXraayMasbmi W u I Bank

Technology and Infrastructure 2000

Paved roads (% of total) Fixed line and mobile phone

subscribers (per 1,WO people)

(% d manufactured exports) High t%hndogyeq)ats

29.4

39

9.1

Environmenl

Agricultural land (%of land area) 47 12.3 F a s t area (%of land area)

Nalonaliyprotected areas (%of land area)

Freshwater resources per capita (cu. meters) Freshwater withdmal (%of intmal resources) 10.6

3.7 C02 missions per capita (mt)

GDP per unit of energy use (2005 PPP $ per kg of oilequivalent) 6.1

Energyusepercapita(kg d o i l equivalenq 1,679

(US$ rnillfons)

IBRD Total debt outstanding and disbursed 8,769 Disbursements 1,019 Pnnapal repaynents 538 Interest payments 701

IDA Total debt outstanding and disbursed Disbursements Total debt service

0 0 0

IFC (fiscal year) Total disbursed and outstcnding portfolio 2,305

ofwhidr i F C m a c c a n t 1,196 Disbursements f a IFCown account 252 Patfdio sales, pfepaynents and

74 repaynents for iFC own account

MiGA Gross exwsure 491 New guarantees 127

2007

30 0

126

6 8

47 12 I 6 4

7,123

3 7

6 6

1,644

2007

5,674 505

1,037 350

0 0 0

1,078 628 93

138

38 0

Note: Figures lnltalicsarefwyearsoherthanthosespacified. 2007dataarepfeiiminary .. indicates data are not avdiabie. -indicates observation is not applicable.

Development Economics, Development Data G w p (DECDG)

Y27B9

118

Mi Hen ni u m Development Goals Argentina

With selected targets to achieve between 1990 and 2015 (estimate closest to date shorn, +/- 2 years)

Goal 1: halve the rates for extreme poverty and malnutrition lee0 1995 2000 2007 Poverty headcount ratio at $1 25 a day (PPP, %of population) Poverty headcount ratio at nalonal poverty line (% ofpopuialion) Share d i m m e or consumplion to the poorest qunitiie (Oh) 4.6 3.9 3.2 3.1 Prevalerce of malnutrition (%of children under 5) 2.3

Goal 2: ensure that children am able tocomplete primaryschoollng Primaryschod enrollment (net, %) 94 99 99 Rimarycmplelon rate (% of relevant age group) 98 99 97 Secondsy school enrollment (gross, %) 72 97 54 Youth literacy rate (%of people ages 15-24) 98 99

Goal 3: eliminate gender dsparityin education and empower w m e n Ratio of girls to boys in piimary and secondaryeducalon (%) 103 1W Wanen employed in the nonagriarlturai sector (% d nonagriculiurd employnent) 37 40 43 45 Raportion of seats held by wmen in national pwlianent (56) 6 25 28 35

Goal 4: reduce under4 mortality by twothirds Unda--5rnortalityrate(per 1,wO) 29 23 19 16 Infant morkiityrate (per1 ,wO live birhs) Measles lmmunizadon (proportion of one-war olds immunized. %)

25 20 17 14 93 69 91 97

Goal 5: reduce maternal mortality by three-fourths Matemal mortality ratio (modeled eslimab, per 100,WO live births) 77 Births attended by skilled hedth staff(% of total) 96 98 99 Conraceplve prevalence (% of women ages 1549)

Goal 6: halt and begin to reverse the spread of HlVlAlDS and other majordiseases Prevalence of HIV (% of population ages 1549) 0.5 0.5 Incidence of tuberculosis (per lW,oOO people) Tuberculosis cases detected under DOTS (56)

73 60 49 39 4 31 71

Goal 7: halve the propottbn of people without sustalnable access to bask needs Access t o w improved water source (% of population) 94 85 96 96 k c e s s to improved saniktion facilities (% dpopulalon) 81 85 89 91 Forest area (% of total land area) 12.9 12.3 12.1 Nationalllyprdectedareas(%oftdal landarea) 6.4 C 0 2 missions (metric bns per capita) 3.4 3.4 3.7 3.7 GDP per unit d energy use (constant 2OC5 PPP $per kg of oil equivalent) 5.3 6.1 6.1 6.6

Goal 8: develop a Qbbal parblership f a development Telephone mainlines (per 100 people) 9.3 16.4 21.4 24.0

0 .o 1.2 17.6 102.3 Mobile phone subscribers (per 1 W people) lntemetusers (per 100 people) Personal computers (per 1 W people)

Education indicators (%) ::r 25 2000 2002 2004 2006

-+-Primary net enrollment rabo

+Ratio of girlsto boys in primary 8 secondary education

I Measks immunization(% of ?-year OUS)

OArgentlna OLabn Amenca h me Caribbean

0 .o 0.1 7.0 23.6 0.7 3.6 6.9 9.0

ICT indicators (per 1,000 people)

150 lIOO 1

Note: Figures in italics are for years oher than those specified. .. indicates data are not available.

Development Economics, Development Data Group (DECDG).

3/27/08

119

MAP SECTION

AA

nndd

eess

PPaa

ttaa

ggoo

nnii

aa

AAnn

ddee

ss

PPaa

mmpp

aass

JUJUYJUJUY

S A L TAS A L TA

TUCUMÁNTUCUMÁN

SANTIAGOSANTIAGO

DEL ESTERODEL ESTERO

LALA

RIOJARIOJA

CATAMARCACATAMARCA

FORMOSAFORMOSA

CHACOCHACO

S A N TAS A N TAF EF E

CORRIENTESCORRIENTES

MISIONES

MISIONES

E N T R EE N T R ER Í O SR Í O S

B U E N O SB U E N O SA I R E SA I R E S

CORDOBACORDOBA

SANSANJUANJUAN

SANSANLUISLUIS

MENDOZAMENDOZA

L AL APA M PAPA M PA

RIO NEGRORIO NEGRO

NEUQUENNEUQUEN

TIERRATIERRADEL FUEGODEL FUEGO

C H U B U TC H U B U T

S A N TAS A N TAC R U ZC R U Z

CerroCerroAconcaguaAconcagua(6960 m)(6960 m)

Mar del PlataMar del Plata

Bahía BlancaBahía Blanca

RosarioRosario

StanleyStanley

Santa RosaSanta Rosa

NeuquénNeuquén

ViedmaViedma

RawsonRawson

Comodoro RivadaviaComodoro Rivadavia

UshuaiaUshuaia

Río GallegosRío Gallegos

MendozaMendozaSan LuisSan Luis

San JuanSan JuanCordobaCordoba

ParanáParanáSanta FeSanta Fe

La RiojaLa Rioja

CatamarcaCatamarca

San Miguel De TucumánSan Miguel De Tucumán

Santiago Del EsteroSantiago Del Estero

SaltaSalta

San Salvador De JujuySan Salvador De Jujuy

FormosaFormosa

ResistenciaResistenciaCorrientesCorrientes

PosadasPosadas

BUENOS AIRESBUENOS AIRES

LagunaLagunaMar ChiquitaMar Chiquita

Para

náPa

raná

ColoradoColorado

Para

náPa

raná

Para

guay

Para

guay

Pilcomayo

Pilcomayo

SSaallaaddoo

NNeeggrroo

DDeesseeaaddoo

CChhiiccaa

CChhiiccoo

CChhuubbuutt

DDeessaagguuaaddeerroo

UUrruugguuaayy

SSaallaaddoo

La PlataLa Plata

JUJUY

S A L TA

TUCUMÁN

SANTIAGO

DEL ESTERO

LA

RIOJA

CATAMARCA

FORMOSA

CHACO

S A N TAF E

CORRIENTES

MISIONES

E N T R ER Í O S

B U E N O SA I R E S

CORDOBA

SANJUAN

SANLUIS

MENDOZA

L APA M PA

RIO NEGRO

NEUQUEN

TIERRADEL FUEGO

C H U B U T

S A N TAC R U Z

Mar del Plata

Bahía Blanca

Rosario

Stanley

Santa Rosa

Neuquén

Viedma

Rawson

Comodoro Rivadavia

Ushuaia

Río Gallegos

MendozaSan Luis

San JuanCordoba

ParanáSanta Fe

La Rioja

Catamarca

San Miguel De Tucumán

Santiago Del Estero

Salta

San Salvador De Jujuy

Formosa

ResistenciaCorrientes

Posadas

La PlataBUENOS AIRES

PARAGUAY

B R A Z I L

URUGUAY

CHILE

CHILE

BOLIVIA

LagunaMar Chiquita

Para

ná

Colorado

Para

ná

Para

guay

Pilcomayo

Salado

Negro

Deseado

Chica

Chico

Chubut

Desaguadero

Uruguay

Salado

ATLANTICOCEAN

PACIFICOCEAN

A

nd

es

Pa

ta

go

ni

a

An

de

s

Pa

mp

as

CerroAconcagua(6960 m)

ToCoihaique

ToPuerto Montt

ToLos Ángeles

ToTalca

ToValparaíso

ToLa Serena

ToCopiapó

ToCalama

To Tarija

ToSan Pedro

ToCascavel

ToSanta Rosa

ToSanta Maria

ToArtigas

ToTacuarembó

ToMontevideo

80°W

70°W

70°W 60°W

60°W

50°W

50°W

50°S

40°S

30°S

30°S

50°S

40°S

ARGENTINA

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 100 200 300 Miles

0 100 200 300 400 500 Kilometers

IBRD 33362R

AUGUST 2008

ARGENTINAFALKLAND ISLANDS (ISLAS MALVINAS)

A DISPUTE CONCERNING SOVEREIGNTY OVER THEISLANDS EXISTS BETWEEN ARGENTINA WHICH CLAIMSTHIS SOVEREIGNTY AND THE U.K. WHICH ADMINISTERS

THE ISLANDS.

SELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES