Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 52955-MX

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$220 MILLION

TO THE

UNITED MEXICAN STATES

FOR A SCHOOL-BASED MANAGEMENT PROJECT

IN SUPPORT OF THE SECOND PHASE OF THE

SCHOOL-BASED MANAGEMENT PROGRAM

May 20,2010

Human Development Department Colombia and Mexico Country Management Unit Latin America and the Caribbean Region

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

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AEE AGE

AGEB APF APL CDI

CEPSE

CGEIB

CGEPEC CNPEC

COI CONAFE

CONALITEG

CONAPO CPS

DGE DGDGIE

CQS

DGEI

EDUCO

ENLACE

EQIP FM

FEEC FNEC

GDP

CURRENCY EQUIVALENTS (Exchange Rate Effective April 20, 2010)

Currency Unit = Mexican Peso US$l.OO = MX$12.2188

FISCAL YEAR January 1 - December31

ABBREVIATIONS AND ACRONYMS

State Education Authorities (Autoridades Educativas Estatales) Support to School Management (Apoyo a la Gestidn Escolar) Basic Geo-Statistical Area (A?rea Geo-Estadistica Bdsica) of CONAPO Parents? Association (Asociacidn de Padres de Familia) Adjustable Program Loan National Commission for the Development of Indigenous Peoples (Comisidn Nacional para el Desarrollo de 10s Pueblos Indigenas) State Education Council for Social Participation (Consejo Estatal de Participacidn Sot en la Educacidn) General Coordination for Intercultural and Bilingual Education (Coordinacidn General para la Educacidn Intercultural Bilingiie) PEC State General Coordination (Coordinacidn General Estatal del PEC) PEC National Coordination (Coordinacidn Nacional del PEC) Integrated Accounting System (Sistema de Contabilidad Integral) National Council for Educational Development (Consejo Nacional de Foment0 Educativo) of SEP National Free Textbooks Commission (Comisidn Nacional de Libros de Text0 Gratuitos) National Population Council (Consejo Nacional de Poblacidn) Country Partnership Strategy Selection Based on Consultants? Qualifications General Directorate for Evaluation (Direccidn General de Evaluacidn) at SEP General Directorate of Management Development and Education Innovation (Direccidn General de Desarrollo de la Gestidn e Innovacidn Educativa) General Directorate for Indigenous Education (Direccidn General de Educacidn Indige na) El Salvador?s Community-Managed Schools Programme (Educacidn con Participacidn de la Comunidad) National Evaluation of School Academic Performance (Evaluacidn Nacional del Logro Academic0 de Centros Escolares) Education Quality Improvement Project Financial Management (Gestidn Financiera) State Trust Fund for the PEC (Fideicomiso Estatal de Escuelas de Calidad) National Trust Fund for the PEC (Fideicomiso Nacionalpara Escuelas de Calidad) Gross Domestic Product (Product0 Interno Bruto)

.. 11

FOR OFFICIAL USE ONLY

GCIBE HDI

IADB IBRD

ICB IFR ILO

IMSS INEE

INEGI

IPP LCS

LLECE

MIS MXN M&E

NAFIN NCB

OECD OIC OM

PAD PAT PDO PEC PEF

PETE

PNE PISA

PRI QBS

QCBS RFP

SBM SEB

SEDESOL SEGOB

SEP SEPA

SFB SFP

General Coordination for Intercultural and Bilingual Education Human Development Index Inter-American Development Bank (Banco Inter-Americano de Desarrollo) International Bank for Reconstruction and Development (Banco Internacional para Reconstruccidn y Desarrollo) International Competitive Bidding Interim Financial Reports International Labour Organization The Mexican Social Security Institute (Instituto Mexicano del Seguro Social) National Institute for Education Evaluation (Instituto Nacional para la Evaluacidn Educativa) National Institute of Statistics, Geography and Informatics (Instituto Nacional de Estadistica, Geografia e Informdtica) Indigenous Peoples Plan Least Cost Selection Latin American Laboratory for Assessment of the Quality of Education (Laboratorio Latinoamericano de Evaluacidn de la Calidad de la Educacidn) Management Information System (Sistema de Informacidn de Gestidn) Mexican Peso (Peso Mexicano) Monitoring and Evaluation National Financing Agency (Nacional Financiera, S. N. C.) National Competitive Bidding (Licitacidn Pziblica Nacional) Organization for Economic Cooperation and Development Internal Control Unit (drgano Interno de Control) Operational Manual (Manual de Operacidn) Project Appraisal Document (Documento de Evaluacidn de Proyecto) Annual Work Program (Programa Anual de Trabajo) of PEC schools Project Development Objective Program of Quality Schools (Programa Escuelas de Calidad) Federal Expenditure Budget (PEF) Strategic School Transformation Plan (Plan Estratkgico de Transformacidn Escolar) c PEC schools National Education Program 200 1-2006 (Programa Nacional de Educacidn 200 1-2001 Program for International Student Assessment Institutional Revolutionary Party (Partido Revolucionario Institucional) Quality Based Selection Quality- and Cost-Based Selection Request for Proposal School-Based Management Under-Secretariat of Basic Education (Subsecretaria de Educacidn Bdsical) at SEP Secretariat of Social Development (Secretaria de Desarrollo Social) Secretariat of Internal Affairs (Secretaria de Gobernacidn) Secretariat of Public Education (Secretaria de Educacidn Pziblica) Procurement Plan Execution System Selection under a Fixed Budget Secretariat for Administrative Development (Secretaria de la Funcidn Pziblica)

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

SHCP SIAFF

SIAPSEP

SIL SIPPAC

SIPEC

SNTE SOE sss

SSSEDF

TAL TESOFE

TOR UNDP

Secretariat of Finance and Public Credit (Secretaria de Hacienda y Cre'dito Pziblico) Federal Integrated Financial Management System (Sistema Integral de Administracidr, Financiera Federal) SEP Integrated Human Resources Management System (Sistema Integral de Administracidn de Personal de la SEP) Specific Investment Loan Budget, Payments and Accounting System (Sistema de Presupuesto, Pagos y Conta b ilidad) Information System for the Quality Schools Program (Sistema de Znformacidn del Programa Escuelas de Calidad) National Teacher's Union (Sindicato Nacional de Trabajadores de Educacidn) Statement of Expenses (Estado de Gastos) Single Source Selection Under-Secretariat of Educational Services for the Federal District (Subsecretaria de Operacidn de 10s Servicios Educativos para el Distrito Federal) at SEP Technical Assistance Loan National Treasury Under-Secretariat at SHCP (Tesoreria de la Federacidn) Terms of Reference United Nations Development Programme

Vice President: Pamela Cox Country Director: Gloria M. Grandolini

Sector Director: Evangeline Javier Sector Manager: Chingboon Lee

Co-Task Team Leader: Co-Task Team Leader: Erik Bloom

Ricardo Rocha Silveira

iv

MEXICO School Based Management Project

CONTENTS

I . STRATEGIC CONTEXT AND RATIONALE ...................................................................... 1 Country and sector issues .................................................................................................... 1 Rationale for Bank involvement .......................................................................................... 4 Higher level objectives to which the Project contributes .................................................... 4

PROJECT DESCRIPTION ..................................................................................................... 5

A . B . C .

I1 . A . B . C . D . E . F .

I11 . A . B . C . D . E . F .

IV . A . B . C . D . E . F . G .

Lending instrument .............................................................................................................. 5

Project development objective (PDO) and key indicators ................................................... 7 Project components .............................................................................................................. 7 Lessons learned and reflected in the Project design .......................................................... 10 Alternatives considered and reasons for rejection ............................................................. 12

IMPLEMENTATION ....................................................................................................... 12 Partnership arrangements .................................................................................................. 12 Institutional and implementation arrangements ............................................................... -12 Monitoring and evaluation of outcomeshesults ............................................................... -14 Sustainability ..................................................................................................................... 14

Critical risks and possible controversial aspects ............................................................... 15 Loadcredit conditions and covenants ............................................................................... 17

APPRAISAL SUMMARY ................................................................................................ 17

Program objective and Phases ............................................................................................. 5

Economic and financial analyses ....................................................................................... 17 Technical ........................................................................................................................... 18 Fiduciary ............................................................................................................................ 18

Social ................................................................................................................................. 19 Environment ...................................................................................................................... 19 Safeguard policies .............................................................................................................. 20 Policy Exceptions and Readiness ...................................................................................... 20

V

Annex 1: Country and Sector or Program Background ................................................................. 21

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .......................... 29

Annex 3: Results Framework and Monitoring .............................................................................. 31

Annex 4: Detailed Project Description .......................................................................................... 39

Annex 5: Project Costs .................................................................................................................. 45

Annex 6: Implementation Arrangements ...................................................................................... 47

Annex 7: Financial Management and Disbursement Arrangements ............................................. 51

Annex 8: Procurement Arrangements ........................................................................................... 60

Annex 9: Economic and Financial Analysis .................................................................................. 64

Annex 10: Safeguard Policy Issues ............................................................................................... 73

Annex 1 1 : Project Preparation and Supervision ............................................................................ 79

Annex 12: Documents in the Project File ..................................................................................... -80

Annex 13: Statement of Loans and Credits .................................................................................. -83

Annex 14: Country at a Glance ..................................................................................................... 86

Annex 15: Maps ............................................................................................................................. 89

vi

MEXICO

Source Local Foreign Borrower 146.7 0.0 International Bank for Reconstruction and 217.5 2.5 Development Total: 364.2 2.5

SCHOOL BASED MANAGEMENT

Total 146.7 220.0

366.7

PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSHE

Date: May 20, 201 0

Country Director: Gloria M. Grandolini Sector ManagedDirector: Chingboon Lee

Team Leaders: Ricardo Rocha Silveira, Erik Bloom

Sectors: Primary education (60%);Pre-primary education (30%);Secondary education (1 0%) Themes: Participation and civic engagement (40%); Education for all (30%);Managing for development results (30%) Environmental category: C Joint IFC: N/A Joint Level: NIA

Project ID: P115347 Lending Instrument: Adaptable Program Loan

Project Financing Data [XI Loan [ 3 Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 220.00

Proposed terms: Commitment linked loan with variable spread, denominated in US dollars, all conversion options, with a single bullet repayment on December 15, 2027, and interest payments made each June 15 and December 1 5 .

vii

FY Annual Cumulative

I I I

Project implementation period: July 1,201 0 End: March 30, 20 10 Expected effectiveness date: July 1, 20 10 ExDected closing date: June 30. 2013

201 1 2012 2013 116.0 72.0 32.0 116.0 188.0 220.0

v

Does the project depart from the CAS in content or other significant respects? Ref: PAD I.C. [ No

.8

Does the project require any exceptions from Bank policies? Ref: PAD IKG. Have these been approved by Bank management? Is approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD III. E. Does the project meet the Regional criteria for readiness for implementation? Ref: PAD IKG. Project development objective Ref: PAD ILC., Technical Annex 3

The long-term development objective (PDO) of this Adaptable Program Lending is to improve the quality of education as measured by coverage, social participation, and educational outcomes. Consistent with its development objective, the PDO for Phase I1 (the Project) is to strengthen PEC by increasing overall coverage and social participation while putting greater emphasis on marginalized schools and on the indigenous population, as well as a reorientation of the School Grants to improve schools’ internal efficiency and learning outcomes. Project description Ref: PAD ILD., Technical Annex 4 Component 1: School Grants (US$343.89 million; Bank financing: US$211.72 million). Provision of support to PEC, through the provision of School Grants to Eligible Schools to implement school improvement plans. Component 2: Monitoring and Oversight. (US$18.59 million; Bank financing: US$4.3 million) This component would finance Program monitoring, oversight, and supervision, and dissemination. Subcomponent 2.1 would provide support for: (i) the continuous operation, maintenance and upgrading of the PEC national management information system; and (ii) the accreditation and strengthening of state programs to manage information systems; Subcomponent 2.2 would provide technical assistance to monitor and oversee the Project; and Subcomponent 2.3 would support the design and implementation of an information campaign to disseminate Project objectives, activities and results. Component 3: Policy Development and Evaluation. (US$3.63 million; Bank financing: US$3.43 million) This component would support the organizational and institutional development of the Program and contribute to long-term policy changes. Subcomponent 3.1 would carry out evaluations and assessments to create a strong analytical basis for development and improvement of PEC; and Subcomponent 3.2 would carry out project-related policy studies. Which safeguard policies are triggered, if any? Ref: PAD IK F., Technical Annex 10 Indigenous Peoples (OP/BP 4.10)

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

[ ]Yes [XINO

[XIYes [ ]No

... Vlll

Significant, non-standard conditions, if any, for: Ref PAD III. F. Board presentation: N/A Loankredit effectiveness:

0 Effectiveness Conditions: (a) the Contrato de Mandato has been executed and the relevant legal opinions have been

(b) A notice (Oficio) has been issued requesting the States to comply with transparency issued;

provisions and at least one State has agreed to comply with them. 0 Disbursement Condition:

(a) Disbursements for payments for goods, works and consultants’ services under the School Grants shall not be made unless the respective State has agreed to comply with the transparency provisions.

Covenants applicable to project implementation: (a) SEP shall enter into a separate Coordination Agreement with each of the States to

support the implementation of the project. (b) SEP shall maintain an Operational Manual, which is mandatory for SEP and the

States, containing specific provisions on detailed arrangements for the implementation of the Project, including: (i) transparency provisions, (ii) the Indigenous Peoples Plan, and (iii) the environmental and health regulations to be observed in case minor construction or rehabilitation activities need to be carried out in the context of School Grants.

(c) The Borrower shall enter into a contract (Contrato de Mandato), among SEP and NAFIN, whereby NAFIN agrees to act as financial agent of SHCP.

(d) The hnds to finance Part 1 of the Project (school grants) will be managed through trust funds (fideicornisos). Representatives of the SEP and of the States shall be part of the national and state technical committees of the trust funds respectively and shall ensure compliance with the relevant provisions of the Loan Agreement.

ix

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1 . Mexico, a member of the Organization for Economic Cooperation and Development (OECD), is the world’s fourteenth largest economy.’ Yet, human development indicators, as measured by the Human Development Index (HDI), are relatively poor. Overall, Mexico ranks 53rd, the second lowest score among OECD member countries and behind other middle income Latin American countries like Argentina, Uruguay, and Chile.* The high level of poverty and inequality is especially prevalent in poorer states and among indigenous peoples. Advancing educational outcomes among the poor is central to improving human development indicators in Mexico. The main education sector issues are: (i) low overall learning throughout the system, (ii) low access at the upper secondary level, and (iii) low internal efficiency.

2. In the past two decades, Mexico has seen important gains in coverage in basic education3, reaching 94 percent in primary education. Those that remain outside the system are disproportionately indigenous groups and populations living in remote areas. Educational attainment has risen significantly, from 6.8 years in 1993, to 8.4 years in 2006. Despite these gains, Mexico still has the lowest level of education coverage among OECD countries. The enrollment rate for u per secondary education is only 42 percent, about half of the OECD average of 83 percent. Y 3 . As Mexico moves towards universal coverage of basic education, there is concern about the quality and relevance of learning. Mexico’s performance on the 2006 Program for International Student Assessment (PISA) test shows a decline in reading competencies among 15 year olds between 2000 and 2006, although results for mathematics were considerably better. With respect to the science assessment, Mexico was the only OECD country for which the majority of test takers did not score above the proficiency level 2 (out of 6 levels). The median score for Mexico was level 2, as compared to level 4 for Finland, the best performing country. Overall, Mexico has the lowest results in PISA assessments among all OECD countries.

4. Improving educational attainment and learning outcomes is central to Mexico’s competitiveness in the global economy. The World Economic Forum ranked Mexico as 60th in terms of global competitiveness, one of the lowest for an OECD country and below several other countries in the region. Mexico’s ranking is negatively affected by its low education achievements5 In recent years, Mexico has not been able to increase its economy’s productivity. For a mature economy like Mexico’s, increasing productivity is the main engine of economic

’ World Development Indicators database, World Bank, revised 10 September 2008 UNDP (2009), Human Development Report. In Mexico, basic education is defined as preschool education (educacidn inicial) covering ages three to five,

primary education (primaria) covering grades one to six, and lower secondary education (secundaria) covering grades seven to nine. Under the Mexican Constitution (Art. 3), basic education is compulsory. Upper secondary education (offered through many systems, collectively known as media superior) covers grades ten through twelve.

’ World Economic Forum (2009) The Mexico Competitiveness Report 2009.

2

OECD (2008) Education at a Glance.

1

growth. In the 199Os, productivity growth in Mexico was a low 0.4 percent per year, well below the 1.1 percent average among the seven largest economies in the region. This is also well below levels seen in 1960s and 1970s, when Mexico regularly saw annual productivity gains above 1.5 percent6 Mexican labor cannot compete on the basis of wages alone and the country is no longer competitive with low cost producers in Asia and Central America. Globalization requires economies to become more specialized and to increase the value-added of their export products. Mexico needs to focus more on adding value and moving from a low-cost labor-based economy to a knowledge-based economy that exploits the new global economic environment.’

5. The Mexican economy was severely affected by the global economic and financial crisis. As a relatively open economy, Mexico was hard hit by the collapse of international trade during the last quarter of 2008 and the first quarter of 2009. As a result, annual economic growth in 2008 was down to 1.3 percent and GDP fell by 6.5 percent in 2009. The contraction of economic activity led to a sharp decline in tax revenue that was partially compensated by non- recurrent revenue in 2009. Non-oil tax revenue dropped by 11.5 percent in real terms in 2009 while Value Added Tax revenue fell by 15 percent. The Government compensated for lower oil and non-oil budget revenue with resources from a successful oil price hedge, an extraordinary transfer of profits from the Central Bank, and drawing resources from the Government’s revenue stabilization funds. The Government has protected the budget of the education sector and the federal budget for 2010 shows the education sector was largely spared from cuts that affected other sectors.

6 . Recognizing the importance of investing in human capital for the future growth, the Government has protected the budget of the education sector and the federal budget for 2010 shows the education sector is spared from cuts that affected other sectors. Mexico’s experiences in past economic crises show that the demand for basic public education may actually increase, particularly at the lower secondary level. Under this scenario, the basic education system has to maintain quality in the face of growing demand and possibly reduced budgets. The Government plans to return to a balanced budget in 2012, in line with its traditional policy of fiscal responsibility.

The education sector is the single largest public expenditure.

7. Mexico has a long history of introducing reforms in the education sector. While the sector has been successful in increasing access and coverage, past reforms focusing on improving quality and accountability have received mixed reviews. Previous reforms have largely been “top-down” in nature with little active participation from the state governments, unions, and civil society. In an attempt to move beyond this cycle of unfulfilled reforms, the Alliance for Education Quality (La Alianza Para la Calidad de la Educacidn) was created through a formal agreement between the Federal Government of Mexico and the National Teacher’s Union (Sindicato Nucional de Trabajadores de Educacidn, SNTE). The Alliance is working with civil society and state governments to implement its agenda. The central goal of the Alliance is to improve student learning in basic education, through large-scale social mobilization leading to a transformation of the management and service delivery in the education sector.

Loayza, Fajnzylber and Calder6n (2005) ’ Farrell, D., A. Puron, and J.K. Remes (2005) “Beyond Cheap Labor: Lesson for Developing Economies.” McKinsey Quarterly, Number 1 :99- 109.

2

8. Improving social participation in schools is a long-term goal of the education sector. In 2001, the Federal Government created the Program of Quality Schools (Program Escuelas de Calidad; PEC) to promote community participation in schools. Stakeholders from the school community include principals, teachers, parents, and community members that form the School Council of Social Participation. Participation by the schools in PEC is voluntary. PEC contributes to school autonomy by allowing local stakeholders to diagnose the specific shortcomings of a school and to design a School Transformation Strategic Plan (Plan Estrate‘gico de Transformacibn Escolar; PETE). The plans are then submitted to state officials, and the accepted plans receive resources for up to five years (renewable each year, based on satisfactory performance). At present, the Federal Government funds 75 percent of the total cost of the Program, while states’ finance the remaining 25 percent. Schools can raise further resources from the school community, including nongovernmental organizations and the private sector. Additional PEC rules require that the school community be involved in carrying out the plan. Parents have a direct relationship as they are custodians of the funds and must verify the purchases and contracts made using PEC resources. In most states, the demand for PEC funding exceeds the availability of resources. A state selects the schools following Federal Government rules that require a competitive review of the PETEs, prioritizing disadvantaged schools, particularly indigenous schools.

9. PEC changes the school climate by creating the conditions for social participation in school management. Furthermore, PEC creates a significant level of autonomy as the school plans are the creation of the school community, which is then responsible for carrying out the plans. There are many elements of accountability in the Program - from parental and community oversight of the plan implementation and spending of resources, to federal and state supervision of the Program. PEC is one of the first attempts to introduce school autonomy in Mexico. In PEC schools, states continue to appoint and pay teachers and other school employees, cover most other current and capital expenditures.

10. Community participation has the potential to bring a number of benefits to education. How a school is run and the local school environment play a significant role in education.’ Changes and improvements in the school climate (relations between students and teachers for example, belief in students’ ability to learn and support for that to happen) and schooling practices are shown to have an impact on achievement. Increased autonomy intends to give schools the flexibility to empower teachers, thus improving the school climate as well as the relationship between students and teachers. The analyses also showed that parental involvement with schools and attitudes about their children’s schooling have an impact on educational achievement. Strengthened accountability mechanisms create space for parents to actively participate in the education system and, if successful, raise aspirations for greater educational attainment levels for their children.

“States” here refer to the 31 states that comprise the United Mexican States and the Federal District (D.F.) of

World Bank (2005). Determinants of Learning Policy Note. Latin America and Caribbean Region, Human

8

Mexico City.

Development Department. The World Bank: Washington, DC. 9

3

B. Rationale for Bank involvement

1 1 . Mexico invited the Bank’s participation to strengthen PEC. Research and education literature have long shown the importance of schools in “producing” education quality and highlighted the opportunity to use participation and assessments to improve quality. In 2005, the Mexican Government requested World Bank support for PEC in 2005 to help improve education learning outcomes. At that time, PEC had been operating for four years and there were concerns about its impact and sustainability. The Government felt that the Bank’s presence would consolidate gains and provide crucial support to expand the Program as well as strengthen fiduciary norms. This built on earlier technical and financial support that the Bank had provided to the education sector.

12. Bank support for PEC was designed to be both flexible and long-term. Reforming an education system is a long-term process and the Government and the World Bank agreed that an Adjustable Program Loan (APL) would be the most appropriate mechanism to provide support for PEC. This would allow the Program to adjust to changing conditions in Mexico and to incorporate lessons learned both with the Program and in other countries. The lessons of the previous project and recent Bank studies on school governance have been incorporated in Project design. The program aims to increase the role of community participation in school management. The proposed second phase would consolidate gains and make appropriate improvements to the model, and expand the Program to more disadvantaged schools while increasing social participation, with the goal of seeing improvements in intermediate school outcomes such as reduction in dropout rates. The third phase would see the maturation of the Program and improvements in learning outcomes.

C. Higher level objectives to which the Project contributes

13. Both the National Development Program” and the Bank’s Country Partnership Strategy (CPS) for Mexico1*, including the CPS Progress Report discussed by the Executive Directors on March 25, 2010, emphasized increased social participation. The CPS proposes comprehensive assistance to efforts to promote social inclusion and to reduce poverty. This includes supply side and demand side human development programs that target the poor. The Federal Government endorsed PEC in the National Development Program, under the “Promoting Social Inclusion and Reducing Poverty” objective. The Sectoral Program for Education and the Alliance specifically call for greater community participation in education.

l o World Bank (2005). Determinants of Learning Policy Note. Latin America and Caribbean Region, Human Development Department. The World Bank: Washington, DC.

l 2 World Bank Group (2008). Mexico CPS. Report No. 42846-MX, dated March 4, 2008. Poder Federal Ejecutivo (2007). Plan Nacional de Desarrollo, 2007-2012.

4

11. PROJECT DESCRIPTION

A. Lending instrument

14. The lending instrument selected is an APL. In this second phase, the loan amount would be $220.0 million. An APL instrument is especially well suited for achieving Program objectives that require sustained long term investments and that introduce major innovations in the way public education services are delivered. The APL is particularly appropriate for PEC, where the long term objective is improved learning outcomes but where important intermediate steps and achievements are expected.

B. Program objective and Phases

15. to improve the quali educational outcomes$ This objective is measured as follows:

As approved in December, 2005, the long-term development objective of this APL is of education as measured by coverage, social participation, and

0 Commitment of the Government to the Program as expressed by the number of participating PEC schools as a percentage of public basic education schools;

Commitment to the goals of School Based Management, as expressed by social participation in school financing (parental contribution^)'^ and in PETEs; and

0 Educational outcomes as expressed by average test scores in Math and Spanish for students in participating PEC schools.

16. The Program objective remains valid for the second phase. The Government and the World Bank agreed on a set of triggers to guide the decision to proceed from Phase I to Phase I1 and from Phase I1 to Phase 111. The successful completion of the triggers is an important criterion to determine continued support for the Program. Table 1 outlines the triggers in the program for moving from Phases 1 to 2 and Phases 2 to 3. The original dates proposed for the second phase were from December 2008 to January 2012. The actual dates for Phase 2 are expected to run from July 1,2010 to June 30,2013 due to a slow start up in the Phase 1.

l 3 This is outlined in Annex 3 of Project Appraisal Document of the Mexico School-Based Management Program (Loan 7347-MX),

As PEC improves its focus on more marginalized schools, average parental contributions are actually expected to decline. Therefore, the second phase of the Program will monitor only social participation in PETEs as indication of commitment by the school community.

5

14

Table 1: Triggers in the APL (as Triggers from Phase I to Phase 11

Number of schools participating in the Program (including schools that graduate) will increase by 50 percent to 32,250 schools (2005 baseline: 2 1,3 12 schools)

Government approval of the Program expansion plan with specific targets for expansion

Program schools (including schools that graduate) as a percentage of all public basic education schools will increase to 15 percent (2005 baseline: 10.2 percent)

Met. The Government, through SEP, has approved the plan with targets to expand school coverage and learning achievements, among others.

Completion of baseline data collection for the impact evaluation

Government approval of the Program expansion plan with specific targets for expansion

efined in Phase I of the Program)

Number of schools participating in the Program (including schools that graduate) will increase by 25 percent

Triggers from Phase I1 to Phase 111

Program schools (including schools that graduate) as a percentage of all public basic education schools will increase to 15 percent (*)

The number of PEC schools located in areas of medium, high and very high disadvantage (marginalization levels) will increase by 30 percent

Completion of the second measurement for the impact evaluation

Evidence of compliance with at least 50 percent of the approved expansion plan in each of the specified targets

(*) The increase to 15 percent was exceeded at the end of Phase 1. It is expected that program schools as a percentage of all public basic education schools will increase to 22 percent by the end of Phase 11.

17. The first phase of the APL supported the federal share of the Program and consisted of: (a) school grants; (b) monitoring and Program oversight; and (c) policy development and evaluation, including specific interventions to encourage the participation of schools serving the most disadvantaged urban areas where the Program is expanded in subsequent phases. The goals for moving to Phase 2 have been met and table 2 outlines specific progress made towards the triggers. Table 2 outlines specific progress made towards the triggers. The triggers for moving from Phase I to Phase I1 have been met.

Table 2: Status of the Trinners between Phase I and Phase I1 Trivmer I Statiia in 2009

Number of schools participating in the Program will increase by 50 percent

Program schools as a percentage of all public basic education schools will increase to 15 percent

Completion of baseline data collection for impact evaluation

~~ ~~~

Exceeded. The number of schools in PEC has increased by 84 percent, from 21,312 (2005/06) to 39,180 (2008/09). Exceeded. In 2009, 18 percent of public basic education schools have participated in PEC.

- Met. PEC carried out a baseline survey.

6

18. As planned, the second phase would support the expansion of Program coverage, especially for the most disadvantaged schools in low-income areas, as well as reorient a significant portion of the school grant to directly improve those schools? internal efficiency and learning outcomes. Phase I1 would also support pilots designed to identify, design and develop adjustments to adapt the Program for further expansion to schools serving small disadvantaged communities in semi-urban and non-urban areas. In addition, PEC would introduce a simplified school planning instrument (PETE-Formato Concentrador or PETE- Condensed) accompanied by extra training of school directors and parents, which would address the two main criticism of the Program: that it is too complex for many school communities and that social participation is deficient. The Oportunidades program15 will support PEC?s efforts in the poorest areas. Finally, PEC would change its Operating Rules to ensure that a larger share of the school grants are used to acquire education inputs other than infrastructure. The triggers for moving from Phase I1 to Phase I11 remain relevant, with minor upward adjustments due to overachievement in Phase I.

C. Project development objective (PDO) and key indicators

19. Consistent with the Program development objective, the PDO for Phase I1 (the Project) is to strengthen PEC by increasing overall coverage and social participation while putting greater emphasis on marginalized schools and on the indigenous population, as well as a reorientation of the School Grants to improve schools? internal efficiency and learning outcomes. This objective is measured as follows:

0

0

0

0

Number of schools in PEC increases 25 percent in 2013 (from 39,180 in 2009 to around 50,000 in 20 13); Percentage of parents that participate in the design of PETEs increases from 74.2 percent in 2009 to 80 percent in 20 13; Percentage of PEC schools in highly marginalized and marginalized areas increases from 40 percent in 2009 to 50 percent in 2013; and Percentage of PEC schools with indigenous students increases from 7 percent in 2009 to 1 5 percent in the 201 3.

D. Project components

20. The second phase of the Project would follow the basic design introduced in Phase I. The main focus of Phase I1 would be to increase the coverage of PEC while also improving the targeting, educational focus and management of the Program. Specific changes would include improving the information system, developing new targeting and prioritization mechanisms, and improving social participation in school decision-making, The PETE-Formato Concentrador, which is user friendly, would remain the main instrument to allocate resources and would be used to ensure that PEC schools achieve their educational objectives. In addition, PEC would play a greater role in coordinating various federal programs at the basic education

l 5 Oportunidudes is a conditional cash transfer program that supports families whose children receive health and education services.

7

level and in strengthening the supervision system. Phase I1 of the School-Based Management Program would maintain the three components from Phase I:

Component 1: School Grants (US%343.89 million or 93.79 percent of Project cost; Bank financing: US$211.72 million) Provision of support to PEC, through the provision of School Grants (up to US$9,000 per year) to Eligible Schools to implement school improvement plans.

Box 1. School Grants

The grants will be offered by the State Education Authorities (AEEs) at the school level. The AEEs complete a process of dissemination, technical assistance to schools for preparation of grant proposals, qualification of proposals, and selection of schools for grant award. PEC operates through a number of different grants. PEC Operating Rules (Reglus de Operucidn) are published by SEP every year; they specify the federal and state contributions and confirm the general selection criteria and the arrangements for Program implementation at the national and state levels. These rules form part of the Project Operational Manual (OM) that has been reviewed by the World Bank. During Program implementation, the AEEs may introduce procedures to improve the Program’s operations, as long as they comply with the Program Operating Rules. The grants’ description below corresponds to the definition in the 2009 Program’s Rules of Operations and are subject to modification.

(a) PEC School Grant is awarded to all participating schools selected. Each year, the schools that wish to continue in the Program must re-apply for the grant and meet the selection criteria. The amount of this grant varies according to each PETE but may not exceed 50,000 Mexican pesos (US$3,968) per year, per school after the first year. A larger grant, not to exceed 100,000 Mexican pesos (US$7,936) is allowed in the first year of a school’s participation in PEC.

(b) Supplemental Grant is awarded to PEC schools that are implementing the PETE with funds from the initial PEC grant, but that have also mobilized additional local resources for their project through donations in cash and in kind from parents, municipal governments, civil organizations, and private enterprises. The supplemental grant matches the amount of local resources raised by the school, but may not exceed 50,000 Mexican pesos (US$3,968) per year, per school. The AEEs transfer the supplemental grant funds in the second half of the school year.

(c) Special Grant is targeted to disadvantaged basic education public schools that want to continue to carry out their PETE after the initial five-year period of the PEC cycle and need financial support to do so. To be eligible for this grant a school must: (i) be located in lower-income areas, (ii) have successfully implemented the regular PEC Program; (iii) meet Program requirements, and (iv) have raised additional local resources.

21. In order to reach smaller schools in marginalized rural areas, PEC is simplifying the planning instrument and increasing technical assistance. The Operating Rules are also being modified to prioritize multigrade schools and schools located in indigenous and high marginalization areas as well as schools with students that receive Oportunidades grants and that have low average grades in ENLACE. Finally, schools with children of migrant workers and CONAFE community centers are also being prioritized.

22. the PEC federal trust fund using counterpart funds.

In addition to grants, this component finances the banking fees for the administration of

8

23. Component 2: Monitoring and Oversight. (US$18.59 million or 5.07 percent of Project cost; Bank financing: U S 4 . 3 million) This component would finance Program monitoring, oversight and supervision, and dissemination and it follows the structure of Component 2 in Phase I. Sub-component 2.1: Program Monitoring (US$1.83 million) would finance the provision of support for: (i) the continuous operation, maintenance and upgrading of the PEC national management information system; and (ii) the accreditation and strengthening of state programs to manage information systems, to ensure that the information obtained through the referred state systems is compatible with the national management information system and provides all the technical and fiduciary information required for the satisfactory implementation of the Project in the relevant state. Sub-component 2.2: Program Implementation (US$11.16 million) would finance the provision of technical assistance to monitor and oversee the Project through: (i) the carrying out of supervision visits; (ii) the organization and carrying out of seminars and workshops at state level; and (iii) the coordination of regional and national meetings attended by PEC’s federal and state authorities. Sub-component 2.3: Program Dissemination (US$5.60 million) would design and implement an information campaign to disseminate PEC’s objectives, activities and results.

Component 3: Policy Development and Evaluation. (US3.63 million or 0.99 percent of total Project cost; Bank financing: US%3.43 million) As in Phase I, this component would support the organizational and institutional development of the Program and contribute to policy changes that in the long term can mainstream positive experiences. Sub-component 3.1: Program Evaluation (US$2.57 million) would carry out evaluations and assessments to create a strong analytical basis for development and improvement of PEC, including: (i) an external evaluation of PEC’s performance and preparation of an annual report; (ii) a qualitative evaluation to determine the non-quantifiable benefits accruing from PEC; (iii) SEP student learning achievements assessments using national education standards for each school year; and (iv) one impact evaluation of the Project. Sub-component 3.2: Policy Studies (US$1.06 million) would carry out Project-related policy studies including: (i) studies focusing on improving the coordination of PEC with other SEP programs, the program administered by CONAFE, and the Oportunidades Program, and (ii) studies focusing on improving the equity and efficiency of PEC.

24. PEC is financed jointly by the federal and state governments. Some school communities make addition contributions in cash and in-kind. The state contributions are outlined in the Program’s Operating Rules (Reglas de Operacidn), which are published annually in the Federal Government’s official gazette (Diario O$cial). The current cost sharing formula requires that states contribute one peso for every three pesos they receive from the Federal Government. An estimated 63 percent of the Federal Government’s participation will be financed by the IBRD. Contributions from states for the Program are estimated at US$32.4 million per year. School communities are expected to donate around US$25 million per year. Table 3 outlines the distribution of resources by component.

9

Component

Component 1 :School Grants

Component 2: Monitoring and Oversight 2.1 Program Monitoring 2.2 Program Implementation 2.3 Program Dissemination

Financing Source, millions US$ World Bank Government Total

211.72 132.17 343.89

4.30 14.29 18.59 0.43 1.40 1.83 2.58 8.58 11.16 1.29 4.3 1 5.60

Total

Component 3: Policy Development and Evaluation 0.20 3.63 3.1 : Program Evaluation 0.14 2.57

220.00 146.66 366.66

1.00 0.06 1.06 3.2: Policy Studies

Front-end Fees I 0.55 0.55

E. Lessons learned and reflected in the Project design

25. The first phase was designed following a careful review of the international literature and Mexico’s experience with PEC. In the past four years, the World Bank has worked closely with PEC at the federal and state levels and has been able to observe how PEC works at the school level. This has helped to develop new lessons and to confirm some of the observations made during the Program preparation. In particular:

(a) Top-down solutions are often inefficient and do not work on the ground. This was a central observation made during the Program design, based on the international literature. However, some elements of PEC are still top-down and have not worked well. One clear example is the current information system (SIPEC), which was developed centrally and has not been adopted by most states and schools. For the second phase, PEC is developing a more flexible information system that would provide the broader information needs of PEC and allow states to customize their own information systems.

(b) Targeting is complicated, given the multiple objectives of PEC and political realities. PEC has a transparent formula that allocates resources across states on a per capita basis using the total number of children between the ages of 4 to 14. As a result, well-off states effectively receive a higher allocation of resources for their poor population while poorer states receive fewer resources for their poor students. The Government and the World Bank are working to adjust the targeting of resources both at the federal level (allocating more resources to poorer states) and at the state level (ensuring that disadvantaged schools are more likely to participate).

(c) Creating legal autonomy does not automatically lead to changes in school management. By law, community participation plays a role in all public schools in

10

Mexico. PEC was originally designed to empower communities to carry out this responsibility effectively. However, qualitative studies and the World Bank?s observation show that community participation has been mixed. In many cases, the school director effectively runs PEC with community groups playing a passive or consultative role. Real community participation requires cultural changes, incentives, and capacity building. The second phase would support enhanced capacity building for school directors and community groups and would more actively promote greater social participation.

Current Rules Resources are allocated on per capita basis to each

(d) School-based management can improve quality but encouraging cooperation among schools also has an impact on school learning. In its initial design, PEC focused on transferring resources to schools with a goal to improve education quality. These resources have been important but investments carried out at higher levels also play an important role that is often overlooked. For example, it is not efficient for one school to purchase a school bus; several nearby schools can pool their resources to purchase one jointly. The second phase would allocate some resources for complementary investments made at the state or local level.

Proposed Changes in Rules Funds allocated to AEEs on the basis of the number

26. The Project would continue to support reforms in the Program Operating Rules (Regfas de Operacidn) that are published annually. Reforms that would be proposed for the second phase include: (i) giving a greater focus to schools in poorer and more marginalized communities, particularly schools with indigenous students; (ii) increasing the transparency of the state-designed school selection criteria; and (iii) increasing cooperation with Oportunidades and schools with a high proportion of Oportunidudes beneficiaries to improve the quality of education supply. PEC would also modify its rules on monitoring to improve the efficiency of data collection. At the state level, PEC participates on the Oportunidades state Committee. Finally PEC would strengthen training in PETE to increase parental participation and ensure better coordination of different SEP programs. These proposed changes in rules are outlined in Table 4.

1 AEE SIPEC is required for all states and schools

One type of PEC model for all states and schools

Priority for schools with indigenous population

PETEs focus on gradual school improvements via small acquisitions of works, goods and services. Works are a large share of expenditures.

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F. Alternatives considered and reasons for rejection

27. It was decided that the design for the second phase would follow closely the proposal in the first phase. During the initial planning of Phase 11, several alternatives were considered but ultimately rejected. A focus on states with higher levels of poverty was rejected given that experience shows that while giving priority attention to the poorer states simplifies targeting, disadvantaged schools and students exist in every state, and high performing schools exist in poor states. Also, there are severely disadvantaged schools in urban areas as well. Another alternative would have been to maintain the status quo, which is continued expansion of enrollments without increasing autonomy or implementing School Strategic Transformation. This was rejected because quality is becoming the major issue in the basic education system.

28. Several options were considered as alternatives to continuing with the Program. The first alternative was to end World Bank support given the successful implementation of the first phase. This option was rejected because PEC is still an evolving program and would benefit from continued technical cooperation and operational support from the World Bank. At the same time, PEC is playing an increasingly important role in the basic education sub-sector and is an important entry point for the World Bank to continue to support basic education. Another alternative was to continue to support PEC but to do it with a stand-alone Specific Investment Loan (SIL), outside of the APL structure. However, Phase I1 is very much in line with the Program’s overall objectives. The APL design remains very much in line with the Government’s plan for PEC and the modifications agreed in the preparation of the second phase are well within the APL.

29. During preparation, several different technical approaches were considered. One option that was considered was to require full participation in SIPEC as a requirement for a state to receive federal funding. This option was rejected and it was decided that PEC would support states to improve their own systems. Likewise, to promote more coverage of PEC in poorer areas, one proposal was to use the existing PEC model in these areas and increase fiduciary training. This model was rejected because it does not address the issue of high level of administrative requirements that are challenging for small schools. Instead, PEC will introduce a simplified planning instrument and offer additional training for school communities.

111. IMPLEMENTATION

A. Partnership arrangements

30. There are no partnership arrangements.

B. Institutional and implementation arrangements

3 1, Phase I1 of the Program would be implemented over a period of three years by SEP using implementation arrangements These arrangements are characterized

that are already in place for the Program’s Phase I. by transparent operating rules, shared financing by the

12

federal and state governments, decentralized implementation by the statesI6, and efficient tools for federal oversight. SEP staff directly managing the Program now has experience with Bank- financed projects and has performed satisfactorily with both Government and Bank procedures. The overall implementation arrangements were reviewed by the World Bank and are considered satisfactory. These implementation arrangements are presented in Annex 6 . Financial management and procurement procedures are described in Annexes 7 and 8 respectively.

32. PEC’s Operating Rules (Reglus de Operucidn) issued by SEP annually govern all Program implementation activities, including the eligibility and the selection criteria for schools to enter the Program. These rules, which are outlined in the project’s OM, are a public document and are published in the Official Gazette. The states and participating schools carry out the Program according to these national guidelines. SEP coordinates Program implementation through the General Directorate of Management Development and Education Innovation (Direccibn General de Desarrollo de la Gestibn e Innovacibn Educativa, DGDGIE). The Federal funds for the Program are administered through a national trust fund (Fideicomiso) entitled Fondo Nacional para Escuelas de Calidad (FNEC), and are allocated to the states using a transparent formula. Every year, the actual amount of federal funds transferred to the state trust funds (Fideicomiso Estatal de Escuelas de Calidad, FEEC) must match the amount of funds provided by the states at a rate of three-to-one, but cannot exceed the maximum state allocation.

33. PEC has a well defined financial structure designed to ensure transparency. NAFIN will act as the financial administrator and financial agent of the Borrower with regard to the Loan. In that capacity, NAFIN would function as an intermediary between the Bank and the Federal Government, managing the loan disbursement processes and provide other implementation support and oversight, based on its many years of experience with Bank- financed projects. The National Treasury (TESOFE, an Undersecretariat at SHCP) would transfer funds to SEP in local currency (Mexican Pesos) The federal share of Program funds will be administered by SEP through the national PEC Trust Fund (FNEC), which transfers school grant funds to the PEC Trust Funds of each state and of the Federal District (Fideicomisos Estatales de Escuelas de Calidad, FEEC) for Component 1, according to the norms established in the Program Operating Rules. In addition, SEP will pay to suppliers of goods and services for the implementation of the other Project components.

34. At state level, the Program is carried out by AEEs. State education authorities are allowed to introduce state-specific Program rules and procedures provided these are compatible with the Program Operating Rules. The FEECs transfer grants directly to the bank accounts of the selected schools after the state education authorities complete a process of Program dissemination, provide technical assistance to schools for preparation of PETEs, analyze school proposals, and select schools. Schools are encouraged to raise additional local resources to support their projects from various sources including municipalities, private sector, parents and civil society organizations. Each school uses grant funds to pay for infrastructure and pedagogical improvements included in the PETE and in the PAT.

l6 The federal district’s education system is administered by the SSSEDF, a federal agency. For the purposes of the Project, the federal district will be treated as a state.

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35. OM, which has been reviewed and is satisfactory to the Bank.

The processes and procedures for Project implementation are described in the Project

C. Monitoring and evaluation of outcomeshesults

36. Monitoring and evaluation (M&E) are central to improving the impact of PEC. Program evaluation activities would be strengthened through the implementation of Component 3 : Policy Development and Evaluation, which provides technical assistance and funding for rigorous evaluation and pilot experiments intended to test possible adjustments to Program design and financing. The impact evaluation program for Phase I1 is described in Annex 3.

37. Program monitoring would be carried out through Component 2: Monitoring and Oversight which provides financing and technical assistance for the continuous operation and upgrading of the PEC national management information system, as well as the accreditation of state information systems. The results framework and Program monitoring indicators are presented in Annex 3. The overall success of the Project would be measured, in the short run, through the number of schools participating in the Program and community participation in PETEs as a measurement of their commitment to the goals and activities of the PETE. Intermediate results of the main component of the Project (school grants), would be measured through indicators of changes inside the school, particularly improvements in school planning, accountability and pedagogical practices. The long term impact would be reflected in reduction of dropouts as well as in improved student learning achievements, measured through tests scores in Math and Spanish during Phase 111. During Phase 11, the Project will monitor results in learning assessments and drop-outs.

38. The proposed indicators of change inside the school would be collected in a representative sample of PEC schools through qualitative surveys applied to stakeholders that comprise the school community such as teachers, parents, school principals and supervisors. As can be seen in Annex 3 (Arrangements for Results Monitoring), the values for these intermediate indicators are already very high. The reason to include them is primarily to ensure that they do not decrease during the implementation of the APL, as the Program expands to more marginalized areas.

39. The baseline for Phase I1 is based on a representative survey of PEC schools carried out in the 2007-2008 school year as part of Phase I. Compatible information is available from the 2003-2004 school year, which was used as the baseline for Phase I.

D. Sustainability

40. Project sustainability is closely linked to ownership on the part of the federal and state governments and of the local community. First, within the Government there is a high level of ownership, as shown by the political and financial support at national and state level. This is reflected in the sustained and increasing funding for the Program provided by both federal and state governments since its inception. In Mexico, there is wide recognition of the importance of School-Based Management (SBM) as a means to improve the quality of education, and this public awareness has been a decisive factor for the support provided at all

14

levels for the operation of the Program. The Alliance for Education Quality has explicitly included social participation within its program and PEC has been incorporated in the Integral Reform of Basic Education. Second, beneficiary ownership has been rapidly growing, as the demand from schools to participate in the Program has increased steadily.

E. Critical risks and possible controversial aspects

41. The World Bank has reviewed and analyzed the risks associated with the Project. PEC is an established program and has broad political support. The World Bank has worked with PEC to improve the Program rules, including some key aspects of fiduciary management, such as the implementation of mechanisms to ensure the adequate flow, integrity and reliability of the program’s operative and financial information which mainly would be focused on: (i) the pre- certification of the methodologies and systems that will be used by the states that do not use SIPEC, (ii) periodical reconciliation of figures that will be carried out at the central level. Likewise, the introduction of the Procurement Plan Execution System (SEPA) should improve efficiency in the management of procurement and as a tool to promote transparency and strengthen accountability. Key risks associated with the Project are summarized in the table below:

15

Risk

PEC is a long term effort to change school culture. The Bank’s intervention is expected to last about a decade. Part of this effort focuses on changing the culture in schools and includes intensive dissemination and capacity building in cooperation with Oportunidades. This is supported by gradual changes in rules that increase the role of parents in making decisions.

technically strengthened and would include a continuous training program for school teachers. PEC is introducing an accreditation process for state- designed and operated information systems to integrate compatible systems. PEC will work with states that do not have their own information system to ensure that they fully incorporate the PEC national

PEC national management information system is being reformulated and

Inertia in school management and social participation

I M Lack of information about what is happening at the school

management information system.

Alliance’s program, which has the support of the teachers’ union and most states. Federal guidelines ensure that states operate the Program fairly and transparently.

The national teachers’ union has supported PEC. PEC is embedded in the

During Phase I, substantial effort was put into improving all aspects of

Some stakeholders resist PEC

L

M Weak financial supervision of the funds as they flow to schools

Project starts from a good position regarding FM

spending on quality-enhancing investments. The maximum amount for infrastructure rehabilitation is currently set at 50 percent and is scheduled to decline.

average, less than $5,000 per year) and these funds only support minor infrastructure projects, such as rehabilitation of existing structure and minor investments such as playground equipment. The Program is increasingly focusing on non-infrastructure investments and this would continue.

life of the APL that is being satisfactorily implemented. Coverage of indigenous children to-date has exceeded target set at IPP. Supervision will include a social development specialist to review thoroughly the Program’s compliance with O P B P 4.10 to ensure that PEC brings the

Gradually, PEC has been adjusting its operating rules to increase

The Program transfers small amounts of resources to schools (on

The Program has an Indigenous Peoples Plan (IPP) covering the entire

Investment is too focused on school infrastructure

L

L

L

Since PEC funds are administered by the schools, they could be used for civil works that could pose a threat to the environment (OPBP 4.01) Since PEC is demand

PEC Operating Rules would continue to prioritize schools in

driven, there is a risk that schools with indigenous children might not apply (OPBP 4.10)

M Since PEC is demand driven, there is a risk that schools with children of lower income households might not apply.

Overall Risk

Risk Mitigation Measure 1 RiskRating (after

mitigation) M

marginalized areas as well as schools wit‘h indigenous students and beneficiaries of Oportunidades. PEC would partner with Oportunidades in disseminating the Program to poor areas and providing technical assistance to ensure that smaller schools have the required managerial support. PEC would also introduce a differentiated transfer instrument with lower administrative complexity to be used in schools with fewer than four teachers.

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F. Loankredit conditions and covenants

42. Effectiveness Conditions:

(a) the Contruto de Manduto has been executed and the relevant legal opinions have been issued;

(b) A notice (OJicio) has been issued requesting the States to comply with transparency provisions and at least one State has agreed to comply with them.

43, Disbursement Condition:

(a) Disbursements for payments for goods, works and consultants’ services under the School Grants shall not be made unless the respective State has agreed to comply with the transparency provisions.

44. Covenants applicable to project implementation:

(a) SEP shall enter into a separate Coordination Agreement with each of the States to support the implementation of the project.

(b) SEP shall maintain an Operational Manual, which is mandatory for SEP and the States, containing specific provisions on detailed arrangements for the implementation of the Project, including: (i) transparency provisions, (ii) the Indigenous Peoples Plan, and (iii) the environmental and health regulations to be observed in case minor construction or rehabilitation activities need to be carried out in the context of School Grants.

(c) SHCP shall enter into a contract (Contrato de Manduto), among SEP and NAFIN, whereby NAFIN agrees to act as financial agent of SHCP.

(d) The funds to finance Part 1 of the Project (school grants) will be managed through trust funds vdeicornisos). Representatives of the SEP and of the States shall be part of the national and state technical committees of the trust funds respectively and shall ensure compliance with the relevant provisions of the Loan Agreement.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

45. The economic analysis confirms the findings for Phase I justifying investment in PEC and outlines the equity impacts of PEC. The Economic Analysis in the PAD for Phase I shows a strong rationale for investing in the Program. The analysis shows the rate of return for basic education ranged from 10 percent to 20 percent in 2005. Studies have shown that the rate

17

of return to education continues to be in the same range, although the recession has probably lowered the rates of return for people with lower levels of education as they are more likely to be unemployed for a longer time. Schools located in highly marginalized or marginalized localities account for almost 40 percent of the country’s basic schools, while those which are located in very low marginalized localities represent 16 percent. In terms of resource allocation, PEC is relatively equitable. The second phase of the Program includes plans to expand the coverage of PEC by about 10,000 schools. Under two different scenarios, PEC’s impact on equity will increase substantially (see Annex 9).

B. Technical

46. PEC is one of the first attempts to introduce active community participation in the management of schools in Mexico. Nevertheless, the technical design of the Program draws on several years of experience in the implementation of PEC and other SEP programs aimed at promoting social participation in education, and by extension, increased the empowerment of parents. Examples of this are the CONAFE’s School Management Support (AGE) and the Primary School Management Project (Gestidn en la Escuela Primaria). The Program design also draws on the World Bank’s analytical work worldwide on school based management and lessons learned in various education projects. During the preparation of Phase I, there was extensive technical work in Mexico focusing on: (a) improving the quality of schooling; (b) setting internal and international benchmarks on key indicators; (c) evaluating the effectiveness of public programs designed to improve school quality; and (d) designing improvements to current policies and programs. There are no major unresolved technical issues from Phase I of PEC.

C. Fiduciary

47. PEC involves a considerable level of complexity in financial management, including, among other factors: transfer of resources from the Federal Government to state governments to schools, and several dispersed spending units with a large number of small transactions. It is also worth mentioning that during the first phase of the project the flow of information was not optimal. These factors, together with the size of the proposed operation, make the inherent FM risk Substantial. However, a strong system of internal and external controls are in place, including the following: (i) in general terms PEC operates under a well defined set of operating rules, which describe the most relevant operational and financial controls, (ii) the FM staff of the project’s implementation unit has considerable experience in Bank’s financed projects, and (iii) PEC has implemented a number of mechanisms which are expected to allow an adequate flow of information, as well as to ensure its integrity and reliability. Hence, the residual FM risk, i.e. the inherent risk as mitigated by existing controls, is Modest.

48. As in the first phase and given the nature of this Program, most of the procurement actions are made by eligible schools with the supervision of PEC’s Coordinaciones Estatafes which receive transfers from the Federal Government through the states’ PEC trust funds (FEECs). The procurement actions at this level include small works, goods and training for the teaching staff using Word Bank Procurement Guidelines. Each school shall include these actions in an Annual Work Program. As in the first phase and given the nature of this Program, most of

18

the procurement actions are made by eligible schools with the supervision of the PEC Coordinaciones Estatales which receive transfers from the Federal Government through the states’ PEC trust funds (FEECs).

D. Social

49. The second phase of PEC was designed in a participatory fashion. As part of the implementation of first phase, PEC conducted several detailed studies on the perception of the Program, focusing both on poor school communities and indigenous communities across the country. This showed that there was strong support for the Program and that parents played a consultative role in PEC. This led to a greater focus on increasing the active role of the community in PEC, which should bear fruit under Phase 11. During preparation, PEC and the World Bank met with most of the state level coordinators and held focus groups to discuss social participation and the poverty focus of the Program.

50. The Indigenous People Plan prepared for the APL continues to be valid for Phase 11. However, activities to ensure indigenous peoples’ participation and benefiting from the project have been up-dated for Phase 11, taking into account lessons learned from Phase I and a recent evaluation of PEC execution in indigenous schools. The updated IPP (Plan Indigena Programa Escuelas de Calidad 2010) was disclosed in the PEC’s website17 on January 26, 2010 and at the Bank’s Infoshop on January 25, 2010. The study included consultation with children, parents, teachers and principals in indigenous schools as well as relevant community stakeholders.

E. Environment

51. The Program is not expected to have any negative environmental impact. The first phase of PEC received an environmental rating of C. Phase I1 maintains the same rating. The Program only supports minor civil works at participating schools (construction of sanitary facilities, minor repairs, and maintenance). The grants are small and insufficient to finance the construction of new buildings or major additions to existing structures. In addition, the Rules of Operation have never permitted the construction of new infrastructure through PEC. The Rules of Operations will contain basic health and environmental guidelines for these minor works. As part of the preparation of Phase 11, the Government and the World Bank reviewed the use of school grants in Phase I and confirmed that all activities were consistent with Phase 1’s environmental rating.

” http://basica,sep,gob,mx/pec/pdf/planindigenaabri12010,pdf

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F. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [ I [XI Natural Habitats (OP/BP 4.04) [ I [XI Pest Management (OP 4.09) [ I [XI Physical Cultural Resources (OP/BP 4.1 1) [ I [XI Involuntary Resettlement (OP/BP 4.12) [ I [XI Indigenous Peoples (OP/BP 4.10) [XI [ I Forests (OP/BP 4.36) [ I [XI Safety of Dams (OP/BP 4.37) [ I [XI Projects in Disputed Areas (OP/BP 7.60)* [ I [XI Projects on International Waterways (OP/BP 7.50) [ I [XI

G. Policy Exceptions and Readiness

52. The Project complies with all applicable World Bank policies.

53. Moving into Phase 11, PEC shows a high level of readiness. The Program has developed extensive experience working with World Bank financing since 2005. In that time, PEC has shown high-level of competence on all aspects of procurement and financial management. The implementing agency is well established and already has updated the OM and has hired all of the necessary staff to carry out the project.

54. PEC I1 will be carried out in accordance with the Bank's Anti-Corruption Guidelines. Mexico has a strong legal framework that supports transparency in public projects. The Federal Government and the Bank have developed procedures that are in full compliance with national laws and Bank guidelines that will reduce the risk of fraud and corruption in the implementation of the Project.

* By supporting the proposed Project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

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Annex 1: Country and Sector or Program Background MEXICO: School Based Management Project

1. Mexico, a member of the OECD, is the world’s fourteenth largest economy.18 Yet, human development indicators, as measured by the HDI, are relatively poor when compared with other large economies: overall, Mexico ranks 53rd, the second lowest score among OECD member countries and behind other middle income Latin American countries like Argentina, Uruguay, and Chile.lg The high level of poverty and inequality is especially prevalent in poorer states and among indigenous peoples. Advancing educational outcomes among the poor is central to improving human development indicators in Mexico. The main education sector issues are (i) low overall learning throughout the system, (ii) low access at the upper secondary level, and (iii) low internal efficiency.

A. Recent Economic Performance

2. As the

The Mexican economy was severely affected by the global economic and financial crisis. a relatively open economy, Mexico was hard hit by the collapse of international trade during last quarter of 2008 and the first quarter of 2009. As a result, annual economic growth in

2008 was down to 1.3 percent and GDP fell by 6.5 percent in 2009. The contraction of economic activity led to a sharp decline in tax revenue that was partially compensated by non- recurrent revenue in 2009. Non-oil tax revenue dropped by 11.5 percent in real terms in 2009 while Value Added Tax revenue fell by 15 percent. The Government compensated for lower oil and non-oil budget revenue with resources from a successful oil price hedge, an extraordinary transfer of profits from the Central Bank, and drawing resources from the Government’s revenue stabilization funds. The Government has protected the budget of the education sector and the federal budget for 2010 shows the education sector was largely spared from cuts that affected other sectors.

3. The main economic shocks impacting the Mexican economy are:

Weaker external demand. Mexico’s economy is tightly linked to the United States, which is the destination of approximately 80 percent of exports.

Low oil prices. Mexico is a major oil producer and benefited greater from the historically high oil prices in 2007 and 2008. The dramatic drop in the price oil affects both the real economy and government revenues.

Lower worker remittances. Worker remittances, primarily from Mexicans in the United States, have already started to decline. In 2008, remittances were 3.6 percent below 2007 levels. Initial reports suggest that these declines accelerated in 2009.

Lower access to external and domestic credit. Mexican firms and the Mexican Government in recent years have relied on external financing sources to supplement

’* World Development Indicators database, World Bank, revised 10 September 2008 l9 UNDP (2008), Human Development Report.

21

domestic borrowing. These sources have largely dried up. At the same time, Mexican Banks, which are largely foreign owned, have also reduced their lending due to a lack of liquidity.

(e) The economic impact of influenza A H l N 1 . The influenza outbreak in the second quarter of 2009 has further slowed demand and reduced tourist and business visits to Mexico. While no estimates are available, similar outbreaks in Singapore, China (including Hong Kong SAR), and Toronto, Canada show that they can result in a sharp, short term decline in demand and economic activity.

4. The Mexican Government implemented counter-cyclical fiscal stimulus policies to mitigate the impact of the external demand shock on the domestic economy. The fiscal stimulus policies adopted include additional public investment in infrastructure incorporated in the 2009 budget as well as employment programs, a reduction and freeze of public sector administrated prices in the energy sector and an expansion of development banks’ credit programs. The economic recession is leading to significantly lower tax revenue which restrains the Government from continuing with any major fiscal stimulus beyond 2009. During the first quarter of 2009, non-oil tax revenue dropped by 11.4 percent in real terms while Value Added Tax revenue plummeted by 21.2 percent. In its preliminary budget projections for 2010 the Government proposes to maintain the same level, in real terms, of programmable budget expenditures as in 2009 while maintaining similar public sector deficit targets as for 2009, 1.8 percent and overall Public Sector Borrowing Requirements of 3.0 percent of GDP. 5. The education sector is the single largest public expenditure and is likely to be subject to budget reductions due to the economic crisis. At the same time, the education sector can be an important counter-cyclical force with its large workforce and its on-going infrastructure program throughout the country. Mexico’s experience in past economic crises show that while the demand for basic public education may actually increase, particularly in the lower secondary level, the demand for higher levels of education is likely to come under pressure, Under this scenario, the basic education system has to maintain quality in the face of growing demand and possibly reduced budgets.

B. The Education Sector in Mexico

6. Mexico has long focused on increasing the coverage of its education system. In the past two decades, Mexico has seen important gains in coverage in basic education, reaching 94 percent at the primary education level. Those that remain outside the system are disproportionately indigenous groups and populations living in remote areas. Educational attainment has risen significantly, from 6.8 years in 1993, to 8.4 in 2006. Despite these gains, Mexico still has the lowest level of education coverage among OECD countries. The enrollment rate for upper secondary education is 42 percent, about half of the OECD average of 83 percent (OECD, 2008).

7. The Mexican education system is divided into compulsory basic education, with three grades of preschool education (educacidn inicial), six grades of primary education (primaria), and three grades of lower secondary education (educacidn secundaria). This is followed by upper secondary education (educacibn media superior), which usually has three

22

grades, and tertiary education (educacidn superior), which has a large number of different options.

8. The public sector is the largest provider of education at all levels in Mexico. The basic education system is operated by the states, although the Federal Government provides most of the financing. Currently, there are 14.5 million students at the primary level (of which 92 percent are in public schools) and 6.0 million students at the lower secondary level (of which 87 percent are in public schools). The upper secondary system is more diverse, with schools operated by a number of different federal systems, state governments, public universities, and the private sector. There are 3.4 million students in the upper secondary education level (of which 80 percent are in public schools). Mexico spends 5.5 percent of its GDP on education, by far the largest expenditure in the federal budget, accounting for fully 25.6 percent of total federal spending.

9. The Federal Government used to directly provide education services throughout the country, with some states offering education services in parallel. The SNTE was born in an environment of growing enrollment in a centralized system, as a close ally of the dominant party, the Institutional Revolutionary Party (PRI). The SNTE played a major role in supporting the growth of the education system. In 1992, the federal basic education system was decentralized and state governments became responsible for its operation, with the Federal Government providing the bulk of financing and the general framework for the education system2’. The success of the decentralization varied from state to state, depending on a number of factors, including the state’s success in merging the state and federal systems.

10. The SNTE is often in conflict with the federal and state governments on many aspects of the education system. State-level teacher strikes are common and often long. This conflict limits the effectiveness of the education system. The SNTE is a confederation of state-level teachers unions. In some states, the “official” teacher’s union (that is, the union affiliated with the SNTE) operates in parallel with a “dissident” teacher’s union. Depending on the circumstances, the state government may negotiate key issues with the official union, the dissident union, or both. The SNTE and its affiliated unions only cover workers in the basic education system. The upper secondary education and the university education systems have numerous, independent unions.

11. The education sector has a long history of introducing reforms. While the sector has been quite successful in increasing access and coverage, past reforms focusing on improving quality and accountability have received mixed reviews. This has led to a sense of cynicism about reform in the education sector. The newly elected Government of President Felipe Calderon (December 2006-November 2012) came in with a strong commitment to reform the education system, as outlined in its National Development Plan. Building on this, the Federal Government and the SNTE signed an agreement on May 15, 2008, creating the Alliance for Education Quality (La Alianza Para la Calidad de Educacidn).

*’ The exception to this model is the Federal District, where the Federal Government continues to provide all public basic education directly through a semi-autonomous agency of SEP.

23

C. Education Quality in Mexico

12. As Mexico moves towards universal coverage of basic education, there is concern about the quality and relevance of learning. Mexico has participated in PISA since 2000, making it the longest participating Latin American country. Mexico’s performance on the 2006 PISA test shows a decline in reading competencies among 15 year olds between 2000 and 2006, although results for mathematics were considerably better.

13. Figure A. 1 presents an international comparison of the science scores by country for the 2006 PISA assessment. From the graph, it is clear that Mexico’s performance is one of the lowest and is, in fact, the lowest of OECD countries. There are many factors influencing a country’s performance on international assessments and it is not possible to summarize the results with one or two variables. However, there are several key observations about Mexico’s performance. First, Mexico is within the same range as other Latin American countries, none of which are particularly strong performers. It should be pointed out that Mexico is wealthier than most Latin American countries and spends more on education. Second, compared to other middle income OECD countries, Mexico has the lowest performance.

14. An alternative way of looking at the data is by comparing the performance of the median student in Mexico with those in other countries. In general, Mexico’s results are clustered around relatively low scores with few students performing in the higher groups. In part this reflects the high level of equity in coverage that leads to a large group of poorly performing students. With respect to the science assessment, Mexico was the only OECD country for which the majority of test takers did not score above the proficiency level 2 (out of 6 levels). The median score for Mexico was level 2, as compared to level 4 for Finland, the best performing country. The same results can be seen for mathematics performance. For example, among OECD member countries, 3.3 percent of students are classified in level 6 (the highest) in mathematics and 10.0 percent are classified in level 5. In Mexico, only 0.1 percent of students reach level 6 and 0.8 percent reach level 5 (OECD 2007).

24

Figure A.1: Science Scores, PISA 2006

Ijoo '---

ource: OECD. PISA 2006 Report.

15. Improving educational attainment and learning outcomes is central to Mexico's competitiveness in the global economy. There is evidence that education quality plays a major role in growth, competitiveness, and equity. International indicators of competitiveness regularly include different indicators of the education of the workforce, including both the general education level of workers and the prevalence of higher education (World Economic Forum 2007). Competitiveness generally refers to increases in a country's productivity and the country's attractiveness to domestic and foreign investors.

16. Mexico has seen poor performance in increasing its economy's productivity. For a mature economy like Mexico's, increasing productivity is the main engine of economic growth. In the 1990s, productivity growth in Mexico was a low 0.4 percent per year, well below the 1.1 percent average among the seven largest economies in the region. This is also well below levels seen in 1960s and 1970s, when Mexico regularly saw annual productivity gains above 1.5 percent (Loayza, Fajnzylber, and Calderbn, 2005). The World Economic Forum's Global Competitiveness Report (World Economic Forum 2007) ranks Mexico 52nd out of 131. The Report identifies many problems with education that weaken Mexico's ratings, including the quality of the education system (92nd out of 13 l), quality of math and science education (1 1 3'h out of 13 l), and secondary education enrollment (73'd out 13 1). Descriptions of competitiveness in Mexico emphasize the high cost of the low quality of education (Farrell, Puron, and Remes 2005).

17. Mexican labor cannot compete on the basis of wages alone and the country is no longer competitive with low cost producers. Globalization requires economies to become more specialized and to increase the value-added of their export products. Mexico needs to focus more

25

on adding value to its production and moving from a low-cost labor-based economy to a knowledge-based economy that exploits the new global economic environment (Farrell, Puron, and Remes, 2005).

18. Recent economic studies have shown that the quality of education (typically measured by results on the PISA assessment) has a greater impact on growth than measures of education coverage or quantity (such as the total enrollment or the education level of workers). The traditional comparison of years of education assumes that a year of education is worth the same in Mozambique and Mexico, which is clearly not the case. An estimate of the effect of education quality on economic growth shows that a 0.5 standard deviation difference in PISA scores leads to an estimated 1 percent increase in GDP growth. This is probably two to three times faster than the contribution to increasing the level of education, holding the level of quality constant (Hanushek and Wossemann 2007; Hanushek and others 2008). Over several decades this can lead to significant economic growth. In concrete terms, from 1980 to 2007, Mexico saw its GDP double. If the economy had grown 1 percentage point faster per year, Mexico’s GDP would be 2.6 times bigger in the same period.

19. Should an education system focus on improving learning quality for all students or should it focus on educating selected students in key areas like engineering? There is a consensus that education systems have to do both-ensure high-quality learning for everybody and also support investment in higher education, particularly at the postgraduate level (Hanushek and Woessmann 2007).

D. School-based Management and the PEC Program

20. Community participation has the potential to bring a number of benefits to education. School climate played a significant role in the performance of low and high achievers (World Bank, 2005). Changes and improvements in the school climate (relations between students and teachers for example, belief in students’ ability to learn and support for that to happen) and current schooling practices are shown to have an impact on achievement. Increased autonomy may give schools the flexibility they need to empower teachers, thus improving the school climate as well as the relationship between students and teachers. The analyses also showed that parental involvement with schools and attitudes about their children’s schooling have an impact on educational achievement. Strengthened accountability mechanisms could create space for parents to actively participate in the education system and, if successful, raise aspirations for greater educational attainment levels for their children.

21. Despite the compelling case for school based management, there are few rigorous evaluations with respect to its impact on student performance. The majority of researchers indicate that there is little direct evidence for the impact of school based management on student achievement. School outcomes usually change slowly in response to any kind of educational intervention. Research emphasizes a time lag between implementation of educational reforms and the effect on student achievement. School based management interventions show evidence of the benefits of parental and community participation in school improvement activities and research shows that school based management changes the school climate and improves the school environment, factors that eventually lead to improved outcomes.

26

22. A review of World Bank School-based management projects shows that these projects often do not have the direct improvement of learning outcomes as a primary goal and may not include indicators for its measurement because it is difficult to see any changes during the life of the project. Overall, the review found that the grant mechanism was an important enabling instrument to create conditions that can lead to a responsive education system, acting as a catalyst for change and empowerment. Positive outcomes included: devolution of decision making power to the local level; democratization and accountability through the empowerment of local agencies such as school boards or municipal governments; and the sustainability of investment. In addition, the grant schemes can build capacity for improved teaching and learning both through the immediate provision of training and equipment, and through longer term training for development.

23. Examining a SBM initiative in rural Nicaragua, King and Ozler (1 998) noted some gains in student learning. Results show that autonomous public schools are indeed making more decisions about pedagogical and administrative matters than do traditional public schools, but because there is a lag in transforming school decision-making after a school becomes legally autonomous. By measuring the actual level of decision-making at the school level shows a strong, positive relationship with student test scores. In particular, schools that exert greater autonomy with respect to teacher staffing and the M&E of teachers appear to be more effective in raising student performance. Likewise, Cambodia’s Education Quality Improvement Project (EQIP) School Grants Program was evaluated (Marshall 2004). The evaluation shows that SBM can improve educational outcomes. EQIP’s school grants helped reduced dropout and increased promotion rates. There is also evidence that school grants helped improve test scores.

24. One of the best known school based management programs is EDUCO (Educacidn con Participacidn de la Comunidad), an innovative program in El Salvador designed to decentralize education by strengthening the direct involvement of parents and community groups. EDUCO has been remarkably successful in expanding educational opportunities for the poor living in rural areas. A rigorous impact evaluation by Jimenez and Sawada (1999) finds that more participation by parents in schools, as measured by the number of visits to classrooms by a parent association member, is significantly and positively correlated with higher test scores in math and language. The study suggests that community-based school management does improve student achievement and leads to higher teacher attendance compared to traditional, more centralized schools. Jimenez and Sawada highlighted that EDUCO students come from poorer backgrounds and their parents have less education. However, based on grade three test results, EDUCO students do not learn less than their counterparts in traditional schools.

25. Improving community participation in schools is a long-term goal of the sector. In 2001, the Federal Government created PEC to promote community participation in schools. The PEC Program contributes to school autonomy by allowing the local stakeholders to diagnose the specific shortcomings of their school and to design PETEs. Stakeholders from the school community include principals, teachers, parents, and community members that form the School Council of Social Participation. Participation in the Program is voluntary. The plans are then submitted to state officials, and the accepted plans receive resources for up to five years (renewed each year, based on satisfactory performance). Federal PEC funds are matched by the

27

state at a ratio three to one to state, and the schools can raise further resources from the school community, nongovernmental organizations and the private sector. PEC rules require that the school community is involved in carrying out the plan. Parents have a direct relationship as they are custodians of the funds and must verify the purchases and contracts made using PEC resources. In most states, the demand for PEC funding exceeds the availability of resources. Selection is made on the basis of competitive revision of the PETEs, with a bias towards disadvantaged schools.

26. PEC changes the school climate by creating the conditions for more participation in school management. Furthermore, PEC creates a significant level of autonomy as the school plans are the creation of the school community, which is then responsible for carrying out the plans. There are many elements of accountability in the Program for parental and community oversight of the plan implementation and spending of resources, to federal and state supervision of the Program. The PEC schools are assessed, both in terms of the fulfillment of their School Transformation Strategic Plans and Annual Work Programs, but also in terms of a national information system on key indicators, assessment of student achievement in Math and Spanish, and a number of evaluations. In the first three years of PEC, participating schools were able to reduce dropouts by 0.41 percentage points, compared to only 0.23 points decrease for non-PEC schools. The added responsibility that comes with the increased autonomy should help focus principals and teachers on the needs of weaker students (Shapiro and Skoufias, 2005).

28

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies MEXICO: School Based Management Project

(Ip)

Sector Issue

(DO) --..-

Decentralization - The Estado de Mexico Government's Structural Adiustment Loan, approved in December 2000, in the amount of US$505 million, aims to bring the fiscal and financial accounts into a sustainable path, while protecting the social sectors and enhancing their efficiency, and increasing accountability and transuarencv in management of the Dublic sector.

School-Based MS

Supports implementation of the Government of Mexico's compensatory education program, as outlined in the National Education Program (PNE) of the current and former administrations.

MS

Supports Mexico's compensatory education program, and as the final phase of the three-phase APL program, aims to fine tune the delivery mechanisms, based on a filly developed decentralized model. Decentralization - The Decentralization Adjustment Loan, approved in December 1999, in the amount of US$600 million, aims to move Mexico's decentralization toward an efficient and sustainable path. It includes a health policy commitment as part of a group of policy commitments for respective tranche disbursements. The goal in the health sector is to help address one of the main weaknesses in the implementation of the PAC by establishing a one-time grant to finance training, monitoring, reporting, and institutional development to improve the delivery of the basic package of health services. Improve the quality of education as measured by coverage, social participation, and educational outcomes.

Seeks to foster the sustainable and equitable expansion of tertiary education, through student assistance.

Latest Supervision (PSIUISR) Ratings

(Bank-financed projects

Implementat Development ion Progress Objective

Project (Bank-financed only)

Tertiary Education Student Ass APL I (Ln. 7346- MX), 2006

Structural Adjustment Loan (Ln.7043 -ME), 2002

Basic Education APL I1 (Ln. 7108-MX), 2002

Basic Education Dev Phases 111 (Ln. 7249-MX); 2005

Decentralization Adjustment Loan-DAL (Ln870020-ME), 2001

S

S

S

S

S

S

MS

S

Support to Oportunidades Project (Ln 7708-MX), 2009

S S

29

Improve access to Early Childhood Development (ECD) services and improve learning outcomes of children in the most marginalized municipalities of Mexico. Support the Government in the implementation of the Mexico Upper Secondary Education Reform to improve the internal efficiency of upper secondary and its responsiveness to the labor market.

Compensatory Education Project (Ln 7859-MX), 2010

S

Upper Secondary Education Development Policy Loan (Ln 7887-0 MX), 2010

30

Annex 3: Results Framework and Monitoring

MEXICO: School Based Management Project

I Intermediate Outcomes

Increased and better quality community participation, planning and accountability in the decision-making at the school

coverage, social participation, and educational outcomes

I

increasing overall coverage and social participation while putting greater emphasis on marginalized schools and on the indigenous population, as well as a reorientation of the School Grants to improve schools’ internal efficiency and learning outcomes.

Improved capacity of supervisors, school directors, and

Results Framework

Program Outcome Indicators

PEC schools as a percentage of public basic education schools

Commitment to the goals and activities of the PETE or its state equivalent, as expressed by social participation in school management

Average test scores in Math and Spanish for students in participating PEC schools

Project Outcome Indicators

Number of schools participating in PEC

Percentage of community members (proxied by percentage of parents) that participate in the design of PETEs Percentage of PEC schools in highly marginalized and marginalized Basic Geo-Statistical Areas (AGEBs) Percentage of PEC schools with indigenous students

Intermediate Outcome Indicators

School Planning

Average number of participatory

Accountability

Percentage of the community members that h o w the PETE

meetings

Percentage of community members that observe that parents are informed about student performance Percentage of community members that observe participatory decision-making

Number of supervisors Gained in participatory management Number of school level Technical

Use of Program Outcome Information

Information would be used to gauge the Government’s commitment to school based management Information would be used to evaluate the degree and nature of social participation

Information would be used to assess the ultimate impact of PEC-on quality of education as measured by student performance in Math and Spanish

Use of Project Outcome Information

Information would be used to measure Government of Mexico’s ability to reach small communities with SBM mechanisms Information would be used to gauge social participation

Information would be used to assess PEC’s ability to focus on poor school communities

Information would be used to assess PEC’s ability to focus on schools with indigenous students

Use of Intermediate Outcome Monitoring

Information would be used to gauge the extent and depth of community participation in school planning

Information would be used to measure the effect of PEC on social communication and accountability

Information would be used to assess the use of training to improve social participation

31

community members to implement PEC and promote participation in education

Improved management and supervision leading to better decision making

Increased focus on improving education quality and teacher’s pedagogical skills

Greater focus on equity and the selection of poorer schools

Greater efficiency in the monitoring of information in PEC schools

Improvement in the quality and relevance of PEC evaluations

Improvement in student learning

Improvement in student retention

Assistance offered by supervisors Percentage of PEC school directors trained in participatory management Percentage of communities that have received training in participatory management Development of certification system for PEC national management information system for states with own systems Operation of PEC national management information system in all states Percentage of community members that observe teachers encouraging and supporting student performance Percentage of community members that observe teachers encouraging the active participation of the students Development of policy focusing resources on poorer states Development of specific incentives to enroll indigenous and Oportunidades students

0

0

0

Percentage of schools that report via PEC national management information system or another accredited system

Number of SEP programs evaluated by PEC

Percentage of PEC schools with three years of participation with increases in Derformance in ENLACE assessments Reduction in student desertion and early drop-out by school by year of participation in the Program.

0 Information would be used to assess improvements in PEC’s MIS

Information would be used to measure changes in pedagogical practices as a result of PEC

Information would be used to assess PEC’s commitment to prioritize indigenous and poor students

Information would be used to gauge efficiency in monitoring PEC schools

0 Information would be used to gauge use of PEC resources in coordinating SEP programs

Information provides initial feedback to administrators on the impact of PEC.

0 Information provides initial feedback to administrators on the impact of PEC.

32

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Arrangements for results monitoring

1 . Overall Mexico has a strong system to monitor education inputs, outputs, and outcomes. In the basic education system, the Federal Government collects extensive data through its Formato 91 1 system on schools inputs (number of teachers, physical infrastructure, among others) and basic outcomes (enrollment, drop-out, among others). Many states collect additional data from schools under their jurisdiction. Official data are generally of good quality and are available in reasonable time.

2. Mexico has one of the most comprehensive learning assessment systems in Latin America. Currently, Mexico has a test of what students have learned in the 3rd and 5‘h grades of primary education (language and mathematics) and in the 1’‘ and 3rd grades of lower secondary education (language, mathematics, and science). Additional assessments are planned for 1 st grade of primary education and 2nd grade of lower secondary. This assessment, known as ENLACE, is operated by the Federal Government by the National Education Evaluation Institute (Institutu Naciunal de Evaluacidn Educativa, INEE) and operates in 30 of the 32 states. It is given annually, on a census basis, in both public and private schools. ENLACE is curriculum based. The Federal Government introduced in the 2007-08 school year an assessment for 3rd grade of upper secondary education, focusing on language, mathematics, and science. This assessment is mandatory for all upper secondary schools directly receiving federal support, and voluntary for other schools (mostly university-run and private schools). Mexico has also participated in several international learning assessments, such as PISA and the Latin American Laboratory for Assessment of the Quality of Education (LLECE). Several states have created their own education evaluation institutions that apply learning assessments on both a census and survey basis.

3. Mexico also has detailed data on poverty and social indicators. The National Population Council (CONAPO) publishes detailed estimates of poverty at a very local level of disaggregation that allows Government programs (including PEC) to target their interventions to poor populations. These estimates are updated every five years and are confirmed by periodic national household surveys. In addition, there are numerous specialized surveys that are carried by various Government agencies and are publically available.

4. At a program level, PEC also has a strong system to monitor its performance. At the federal level, PEC receives detailed financial information on the transfer to resources to schools and how those resources are spent. One of the activities financed under Phase I1 would strengthen PEC’s national management information system, which would provide both federal and state PEC with more “real time” information on the activities carried out under the Program.

5. For Phase 11, PEC would need to improve its collection of social data. While Formato 9 1 1 provides detailed demographic data on participating schools, additional information would be needed. In particular, this includes information on indigenous students and students with disabilities, including both participation (number of students) and their educational progress. The collection of this data is budgeted in sub-components 2.2. It can be collected through the PETE and PAT and reported through PEC national management information system.

6. PEC would also need to collect more data on participation. Improving community participation is central to PEC’s methodology. PEC has collected quantitative data on social

35

participation (for example, number of schools preparing PETEs and number of school council meetings per year). Moving forward, PEC would focus more on measuring and influencing the quality of social participation. This would be measured through the on-going representative survey of PEC schools.

7. The baseline for Phase I1 is a representative survey of PEC schools carried out in the 2007-2008 school year as part of Phase I. Compatible information is available from the 2003- 2004 school year, which was used as the baseline for Phase I. This would be followed by an annual randomized sample of PEC schools that would allow tracking of intermediate results.

Proposal for Impact Evaluation

8. Options for evaluations. As part of the Project preparation, the World Bank organized a number of meetings with PEC officials and evaluation experts to discuss strategies to measure the impact of PEC on key outcomes. The experts noted the importance of identifying carefully the different questions that will be evaluated. In practice, since PEC has been in operation since 2001 (eight years) and has received continued support from the Federal Government, the key question is not whether the Program has been successful or not. This is typically asked in pilot programs where the goal is to choose among different programs or to ensure that the pilot was successful. The main focus should be on specific aspects of the Program that are under control of PEC and that they may be modified by the Program.

9. In order to validate the Government’s and Bank’s investment in PEC, it is possible to evaluate the overall impact of PEC on key education outcomes (for example, enrollment, retention, and the academic performance of schools). This could be investigated in a desk study that takes advantage of existing historical data. This analysis would focus on the large increase in PEC schools that occurred in 2005. This would essentially create a large pool of schools that wanted to join PEC but were unable to do so in 2004. The evaluation would build on standard regression analysis and be carried out by a competent researcher with available data. The Bank is currently carrying out a similar evaluation on the AGE program2’ in Mexico. This exercise uses the AGE Program’s expansion to compare schools that received support from AGE early to those that received it late. There have been similar studies carried out on PEC that rely on the data from the first years of the PEC Program. These studies have not been updated.

10. PEC plans to expand from about 40,000 to 50,000 during the second phase of the APL. This expansion offers the possibility of evaluating the new model being developed for small schools. Two options include using the encouragement design, where some schools and areas receive more information, and random assignment, where certain schools are chosen to join the Program randomly. Both of these approaches substantially reduce bias in the evaluation by separating out the Program effect from the unobserved variables. Neither of these strategies has been used to date in the PEC Program:

11. The encouragement design can be introduced at the federal level, with different types of information campaigns to encourage enrollment. PEC will need to investigate certain legal issues

21 The AGE program is similar to the PEC program, providing grants to schools. The size of the grant is smaller than the one in PEC program.

36

associated with targeted information. However, if the evaluation is well designed, this should not be a major issue.

12. Random assignment is more difficult to introduce in PEC. Currently, the state of Colima is using random assignment for entry into the Program. While this type of evaluation has to be organized at the state level, it may be possible to convince a few more states to consider random assignment. In this case, the state could start allocating PEC randomly to schools that prepare strategic plans to measure the value of PEC to strengthen the strategic plan. This approach would be worth exploring in states where the strategic plan is mandatory (such as Morelos and Guanajuato) and will require strong support from state authorities to use random assignment of benefits,

13. In addition to statistical evaluations, PEC will promote a number of studies to help understand how the Program works and how it can be improved. One area of interest is understanding how the PEC application process works at the school and state level. This sort of study would follow several schools through the application process, including an understanding of how schools decide to join PEC and how states make decisions to allocate resources. A second study could look at the value of the school management plan (PETE) compared to the value of resources to the school. In this study, PEC would offer special incentives for schools to develop plans without financing the plans. This would be compared to traditional PEC schools where the focus is on preparing a plan in exchange for financing. Identifying the value of the plan vs. the value of financing school projects would provide very important information if the PEC Program expands in the future.

14. Plan of action. PEC and the Bank will work on several different options to take advantage of existing data and to generate new data that will help evaluate the Program and possible reforms. The team proposes several actions:

The team will develop an evaluation plan, based on these recommendations. PEC will ensure that it has adequate financing to carry out any agreements made. Following the on-going study on the impact of the AGE Program, PEC and the World Bank will carry out a similar analysis on PEC taking advantage of the Program’s expansion since 2005. Terms of reference will be developed based on the AGE Program. The study can be carried out as a desk study. The final results will be discussed and disseminated in Mexico. PEC and the Bank will develop an encouragement design focusing on the expansion of the Program. This will include terms of reference for the study, development of a randomization strategy (designing the geographic coverage of the information campaign, assigning it randomly to different areas, and so on), and an implementation strategy. The Project will need to work with a specialist to develop the study and will have to contract a firm or similar organization to carry out an information campaign. PEC will choose several candidate states that might be interested in using random assignment for the new model. In this case, PEC and the Bank would invite experts to the states to explain the model and also have state officials meet with education authorities in Colima. Once a state agrees, terms of reference and an implementation plan would be developed and PEC would contract a specialized consultant and a firm to carry out the work.

37

0 The study on the PEC application process would require consultants to visit schools during various times during the process and to interview participants at the local and state levels. A decision would have to made about the timing of the study (at the beginning of the application or after a school has decided to apply). A suitable sample, probably focusing on three to five schools in four states would probably be sufficient. Assurances would have to be made to the states to guarantee their cooperation. A study on the value of school management plans would require significant investment in terms of design as an incentive program would need to be developed to encourage schools to prepare a PETE. Once this is developed, it would be possible to compare PETE-only schools to PEC school and to non-participating schools. The World Bank will work with PEC to determine interest and funding for this sort of scheme.

0

38

Annex 4: Detailed Project Description22 MEXICO: School Based Management Project

The Quality Schools Program (Programa Escuefas de Cafidad -PEC)

1. PEC started in 2001 and has operated continuously to-date, with the participation of the federal and the state governments through their respective education authorities, as a strategy to help urban schools located in low income areas improve their operating conditions, giving priority to schools located in poor neighborhoods. These schools generally have deficient infrastructure facilities, poor student learning outcomes and low participation by the school community. As the Program evolved, it expanded to include schools in low income rural areas.

2. PEC is an educational strategy that gives autonomy to schools by encouraging shared decisions on school improvements by principals, teachers, and parents. The Program aims to reduce the quality variance among schools by raising the quality of the basic education services in the poorest urban and rural areas. PEC aims to increase the quality of public education through strengthening school autonomy ultimately contributing to: (a) reduce urban poverty and lessen educational inequality by improving the academic achievement of disadvantaged urban beneficiary students enrolled in preschool, primary and lower secondary public schools-Le. throughout the compulsory basic education cycle; (b) strengthen M&E capacity and integrate local management strategies into the national education system; and (c) build social capital in disadvantaged urban areas and increase cooperation between schools and local communities in these areas.

3. The Program assumes that when a school has more autonomy and greater participation by the school community, it is better able to identify aspects that need improvement, take measures towards solving problems and account for results. Social participation in schools - particularly parental participation - raises teacher accountability and increases the flow of resources from the school community. The Program strategy assumes that improvements to the internal organization and decision-making capacity of the schools are key elements to achieve higher quality of education. Starting with this basic concept, PEC promotes a model of school autonomy and School Based Management (SBM) which emphasizes: (i) liberty to make school decisions; (ii) shared leadership; (iii) team work; (iv) flexible teaching practices; (v) collaborative planning; (vi) evaluation to inform continuous improvement; (vii) responsible social participation; and (viii) accountability.

4. PEC is jointly financed by federal and state funds, through SEP and the state education authorities, presently at a ratio of three-to-one federal to state contributions. The school grant is an incentive to promote the desired SBM transformation and, as such, is an innovative tool not only to transfer funds directly to schools but primarily to empower the school community. The school grant is also an instrument to introduce in the schools a culture of accountability, as each participating school must keep precise records of the use of grant funds, and account for the use of any additional resources contributed by local community sources. Parents are responsible for the funds and state education authorities supervise the acquisition

22 Updates Annex 4 of the PAD for Phase I (Report No.33894-MEX).

39

procedures used by the schools and advise schools on procurement and financial management in general.

5. The schools learn about the Program through information campaigns carried out by state education authorities every year and choose voluntarily to apply. Interested schools are invited to prepare PETEs and PATS, which must be approved as a condition for the school to qualify for the Program.

6. The PETE is a strategic five-year plan whereby the school community identifies school challenges and defines the goals it wants to reach in the median term and the means that would be used to achieve these goals. The plans are expected to cover improvements to school management, teaching practices and social participation. Schools with approved plans are selected to receive school grants and may use grant funds to pay for infrastructure, equipment, and pedagogic enhancements tools contemplated in their improvement plans. Each year, the schools evaluate the extent to which they have advanced towards reaching their goals, and may re-apply for grant renewal up to a maximum period of five years.

7. To implement the PETE, schools prepare a PAT where they specify the investments and activities that would be carried out each year. Since the great majority of schools have no experience in strategic planning or in participatory management, PEC provides technical assistance and training to all schools that express interest in participating in the Program. This assistance is provided by state education authorities through different means: (a) direct assistance to the school by the technical coordination of the Program at state level; (b) technical meetings (mesas te'cnicas) organized by the supervisory team of each level of education (preschool, primary and lower-secondary); or (c) services provided to schools by pedagogic assistants assigned to the corresponding supervisory teams. In all cases, technical assistance focuses on school management and planning, diagnosis of school needs and evaluation of results. Technical assistance is primarily provided to school principals who, in turn, have the responsibility for sharing the information with teachers and parents.

8. After the first year of participation in the Program, the schools must prepare a progress report indicating advances made during the year towards reaching each of the goals of the PETE and prepare a new PAT for the following year. These reports are presented to the PEC state education authorities and are made public to the school community at the end of the school year. Approval of the progress report and the new PAT by state education authorities are conditions for the renewal of the grant.

Project development objective and key indicators

9. Consistent with the Program development objective, the PDO for Phase I1 is to strengthen PEC by increasing overall coverage and social participation while putting greater emphasis on marginalized schools and on the indigenous population, as well as a reorientation of the School Grants to improve schools' internal efficiency and learning outcomes. This objective is measured as follows:

0

0

Number of schools in PEC increases from 39,180 in 2009 to about 50,000 in 2013; Percentage of parents that participate in the design of PETEs increases from 74.2 percent in 2009 to 80 percent in 20 13;

40

0 Percentage of PEC schools in highly marginalized and marginalized areas increases from 38.5 percent in 2009 to 45 percent in 2013; and Percentage of PEC schools with indigenous students increases from 7 percent in 2009 to 1 5 percent in the 20 13.

Project components to be financed by the proposed APL in support of PEC

10. Component 1: School Grants (US$343.89 million with contingencies or 93.79 percent of Project cost; Bank financing: US$211.72 million) Provision of support to PEC, through the provision of School Grants to Eligible Schools to implement school improvement plans. This component would finance the necessary resources for targeted participating schools to implement school improvement plans. The federal share of PEC would be partially financed through the Bank loan, which would be complemented by state and community resources as determined by the Program rules.23 The loan would be used to finance the continuity and expansion of the Program in an equitable and efficient manner.

11. administration of the PEC federal trust fund using counterpart funds.

In addition to the school grants, this component finances the banking fees for the

12. At the local level, the Program is carried out by the AEEs. The AEEs complete a process of dissemination, technical assistance to schools for preparation of grant proposals, qualification of proposals, and selection of schools for grant award. The AEEs transfer PEC grants from the state trust fund directly to the bank accounts of the participating schools. To qualify for the Program, schools must establish participatory school management and present a satisfactory School Strategic Transformation Plan proposal. As the number of schools that qualify for the Program tends to exceed Program funds, states are instructed to give priority to qualified schools located in low-income areas. During Phase 11, an estimated 50,000 public schools would benefit from one or more of the following types of PEC grants or alternative grant mechanisms:

(a) PEC School Grant, renewable for a maximum of five years. This initial grant is awarded to all schools selected to participate in the Program in a given year, and may be renewed for a maximum of five years. Each year, the schools that wish to continue in the Program must re-apply for the grant, meet the selection criteria, and be chosen by the state selection committee to receive a grant. The amount of this grant varies according to the requirements of each School Strategic Transformation Plan but may not exceed 50,000 Mexican pesos (US$3,968) per year, per school. The AEEs transfer the grant funds to the bank accounts of the schools in a single installment in the first half of the school year, before the end of the fourth month of classes. A larger grant, not to exceed 100,000 Mexican pesos (US$7,936) is allowed in the first year of a school?s participation in PECOz4 The AEEs transfer the grant funds to the bank accounts of the schools in a single installment in the first half of the school year.

23 Under the proposed phase I1 loan, some 64 percent, 21 percent, and 16 percent of the total cost would be funded by the Federal Government, states, and school communities, respectively. IBRD would finance about 73 percent of the Federal Government?s share. 24 In the case of small multi-grade schools, the maximum amount of the Initial Grant would be reduced to 60,000 and 30,000 Mexican pesos in the first and subsequent years, respectively.

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Supplemental Matching Grant, renewable for a maximum of five years. This grant is awarded to Program schools that are implementing School Strategic Transformation Plans with funds from the initial PEC grant, but that have also mobilized additional local resources for their project. That is, the PEC schools eligible for this type of grant are those that seek and obtain donations in cash and/or in kind from parents, municipal governments, civil organizations and/or private enterprises. The supplemental grant matches the amount of local resources raised by the school, but may not exceed 50,000 Mexican pesos (US$3,968) per year, per school. Schools may apply and receive additional supplemental grants during the five-year Program cycle, as long as they continue to meet the eligibility criteria. The AEEs transfer the supplemental grant funds to the bank accounts of the schools in the second half of the school year, before the end of the gth month of classes.

Special Matching Grant with no renewal restrictions. This special type of grant is targeted to disadvantaged basic education public schools that want to continue to carry out their School Strategic Transformation Plan after graduating from the five- year PEC Program cycle, but need financial support to do so. To be eligible for this grant a school must meet the following conditions: (i) be located in lower-income urban neighborhoods, (ii) be graduated from the regular PEC Program; (iii) meet Program requirements, and (iv) has raised additional local resources in support of their school projects.

13. In its original design, PEC focused largely on urban and peri-urban schools in poor areas. In order to reach smaller schools in marginalized rural areas, PEC will simplify the planning instrument and increase technical assistance. Operating Rules are also being modified to prioritize multigrade schools and schools located in indigenous and high marginalization areas as well as schools with students that receive Oportunidades grants and that have low average grades in ENLACE. Finally, schools with children of migrant workers and CONAFE community centers are also being prioritized.

14. PEC Operating Rules (Reglas de Operaci6n) are published by SEP every year. They specify the federal and state contributions and confirm the general selection criteria and the arrangements for Program implementation at the national and state levels. These rules form part of the Project OM that has been reviewed by the World Bank. During Program implementation, the AEEs may introduce procedures to improve the Program’s operations, as long as they comply with the Program Operating Rules.

15. Component 2: Monitoring and Oversight. (US$18.59 million with contingencies or 5.07 percent of Project cost; Bank financing: US$4.3 million) This component would finance Program monitoring, oversight and supervision, and dissemination and it follows the structure of Component 2 in Phase I.

16. Subcomponent 2.1: Program monitoring (US$I.83 million). This subcomponent would finance the provision of support for: (i) the continuous operation, maintenance and upgrading of the PEC national management information system; and (ii) the accreditation and strengthening of state programs to manage information systems, to ensure that the information obtained through the referred state systems is compatible with the national management information system and provides all the technical and fiduciary information required for the satisfactory implementation

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of the Project in the relevant state. Criteria for accreditation are being developed by PEC and will be detailed in the OM. In addition to fiduciary information, PEC is adapting an education module to provide information that would enable monitoring of education variables at the school level. The component also includes resources for training of system users at the school level. The Area Supervisors are expected to play a key role in these training exercises.

17. Subcomponent 2.2: Program Implementation (US$II.I 6 million) would finance the provision of technical assistance to monitor and oversee the Project through: (i) the carrying out of supervision visits; (ii) the organization and carrying out of seminars and workshops at state level; and (iii) the coordination of regional and national meetings attended by PEC’s federal and state authorities. The national PEC coordination office would provide technical and operational support to the AEEs to ensure smooth Program implementation in accordance with Program Operating Rules. This objective would be achieved with assistance from regular SEP staff assigned to PEC by the Under-Secretariat of Basic Education. This team consists of experts in Program operations and basic education that would carry out the following activities: (a) visit each state several times a year following a regular supervision program; (b) organize seminars and workshops to promote the continuous development of technical staff working in the Program at the state level; and (c) coordinate regional and national meetings, and the annual PEC Congress, attended by federal and state authorities. During these events, Program innovations would be discussed, best practices shared, and the Program Operating Rules updated. Project funds allocated to this component would finance travel by federal and state personnel and expenditures associated with training seminars, workshops, Program meetings, and congresses, including hotel accommodations, meals, speakers, facilitators, and materials to support these events.

Subcomponent 2.3: Program Dissemination (US$5.6 million). This subcomponent supports the design and implementation of an information campaign to disseminate Project objectives, activities and results through a wide range of communication vehicles, with the aim of promoting the Program and guaranteeing full accountability and transparency. To meet this goal, television, radio, newspapers and special publications would be used throughout the year during Program implementation to disseminate messages tailored to specific audiences of parents, teachers, directors, AEEs technical staff, and society at large. A Program magazine (Educare) would continue to be published by the National Free Textbooks Commission (Comisidn Nacional de Libros de Texto Gratuitos-CONALITEG) and distributed three times a year throughout the country. SEP would also continue to collaborate with the Secretariat of Internal Affairs (Secretaria de Gobernacidn-SEGOB) to gain access to the official television network and other media for PEC’s messages. The activities that would be financed under this subcomponent are: (i) the production of television, radio and newspaper messages; (ii) the design and editing of periodicals and pamphlets; and (iii) printing and distribution of materials. Finally, this subcomponent would finance the dissemination of PEC results in national and international seminars.

18. Component 3: Policy Development and Evaluation. (US$3.63 million with contingencies or 0.99 percent of Project cost; Bank financing: US%3.43 million). As in Phase I , this component would support the organizational and institutional development of the Program and contribute to policy changes that in the long term can mainstream positive aspects. This phase of PEC is particularly focused on supporting the coordination and integration of ongoing SEP programs. The PETEs would provide the mechanism through which school

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demands for programs would be channeled to SEP. Schools could then co-finance the use of SEP programs. The OM will detail the types of inputs from SEP programs that can be purchased with school grants.

Subcomponent 3.1: Program Evaluation (US$2.57 million). This subcomponent supports the carrying out of evaluations and assessments to create a strong analytical basis for development and improvement of PEC, including: (i) an external evaluation of PEC’s performance and preparation of an annual report; (ii) a qualitative evaluation to determine the non-quantifiable benefits accruing from PEC; (iii) SEP student learning achievements assessments using national education standards for each school year; and (iv) one impact evaluation of the Project by an external, independent evaluator; using rigorous methodology. A preliminary impact evaluation would be carried out in Phase 11, focusing on efficiency variables. During the proposed Phase 111, a full impact evaluation would be carried out, focusing on student learning of Math and Spanish.

Subcomponent 3.2: Policy Studies (USSl. 06 million). This subcomponent would support the carrying out of Project-related policy studies including: (i) studies focusing on improving the coordination of PEC with other SEP programs, the program administered by CONAFE, and the Oportunidades Program, and (ii) studies focusing on improving the equity and efficiency of PEC. It would support the evaluation of SEP programs that are requested by schools and entered in the PETE. It would also finance other studies that might lead to improvements in the performance of PEC. The analytical work to be financed under this subcomponent would be carried out by national academic institutions and independent consultants.

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Annex 5: Project Costs MEXICO: School Based Management Project

Table la: Program Costs by Component (US$ million)

1.School Grants

2. Monitoring and Oversight 2.1 Monitoring Information System 2.2 Program Implementation 2.2 Program dissemination Subtotal: Program oversight

3. Policy development and evaluation 3.1 Program evaluation 3.2 Policy studies Subtotal: Policy development and evaluation

Front-end fee (0.25%) TOTAL

cost

343.89

1.83 11.16 5.60

18.59

2.57 1.06 3.63

0.55 366,66

O h of Total

93.79

0.50 3.04 1.53 5 -07

0.70 0.29 0.99

0.15 100.00

IBRD Financing

21 1.72

0.43 2.58 1.29 4.30

2.43 1 .oo 3.43

0.55 220.00

O/O of Financing

61.57

23.50 23.12 23.04 23.13

94.55 94.34 94.49

100 60.00

Table lb: Program Costs by Component (US million) Program Cost by Component Local Foreign Total 1.School Grants 343.89 0 343.89

2. Monitoring and Oversight 2.1 Program Monitoring 2.2 Program Implementation 2.3 Program Dissemination Subtotal: Program oversight

1.83 11.16 5.60

18.59

0 1.83 0 11.16 0 5.60 0 18.59

3. Policy development and evaluation

2.57 1.14 1.43 3.1 Program evaluation

0.56 0.5 1.06 3.2 Policy studies

Subtotal: Policy development and 1.70 1.93 3.63 evaluation Front-end fee (0.25%) 0.55 0.55

Total Financing Required 364.18 2.48 366.66

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Table 2: Estimated Project Cost by Component and Project Year US$ million

COMPONENTS 2010 201 1 2012 2013

Total Project Cost

1.School Grants 2. Monitoring and Oversight 2.1 Program Monitoring 2.2 Program Implementation 2.3 Program Dissemination 3. Policy Development and Evaluation 3.1 Program Evaluation 3.2 Policy Studies Front-end fee (0.25%)

Total 126.59 80.01 80.02 80.04 366.66

(*) This amount includes retroactive financing from 2009

120.50(*) 74.46 74.46 74.47 343.89 4.64 4.65 4.65 4.65 18.59 0.45 0.46 0.46 0.46 1.83 2.79 2.79 2.79 2.79 11.16 1.40 1.40 1.40 1.40 5.60 0.90 0.90 0.91 0.92 3.63

0.64 0.64 0.64 0.65 2.57 0.26 0.26 0.27 0.27 1.06 0.55 0.55

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Annex 6: Implementation Arrangements MEXICO: School Based Management Project

1 . The executing agency for the Program is SEP. The Program is carried out by the states and the participating schools. No special Project Coordinating Unit would be created for the implementation of PEC. SEP has the overall responsibility to establish the normative framework for the Program, to finance the federal share of Program expenditures, and to coordinate Program implementation. The normative framework is established by PEC Operating Rules, which are updated and published yearly by SEP.

A. Agencies, Roles and Responsibilities

2. The Program is jointly financed by federal and state government^.^' The federal Government contributes 3/4 of the Program cost and the state governments contribute the remaining 1/4 of Program cost. The federal share of Program funds is administered by SEP through the national PEC Trust Fund (FNEC), which transfers school grant funds to the PEC Trust Funds of each state and of the Federal District (Fideicomisos Estatales de Escuelas de Calidad, FEEC) according to the norms established in the Program Operating Rules. Local communities can make additional contributions directly to the school in cash or in kind. In both cases, these local contributions are recorded in the information system and are managed locally.

3. The FNEC was established in August 2001 through a contract (“Trust Agreement”) signed between SHCP (as Fideicomitente or “Trustee” and the Banco Nacional de Mexico, S A . , as Fiduciaria or “Trust Administrator”) and SEP as the agency responsible for the execution of PEC. The Trust Agreement establishes the capital of the Trust, creates a Technical Committee (Comite Tecnico) to direct the activities of FNEC, defines the responsibilities of the parties under the contract, and specifies the payment due to the Trust Administrator paid out of FNEC funds. The technical committee is entirely composed of federal officials.

4. The responsibilities of the Trust Administrator under this contract are the following:

(a) Transfer 94 percent of FNEC funds to the state governments and the Under-Secretariat of Educational Services for the Federal District (SSSEDF), according to the Program Operating Rules and following the instructions from the Technical Committee;

(b) Invest 6 percent of FNEC funds in operating costs and costs associated with Program dissemination incurred by SEP, following the instructions from the Technical Committee;

(c) Invest FNEC liquid funds in public or private bonds of recognized liquidity and low risk; and

(d) Assign the earnings from FNEC investments, as well as any other contribution to the fund, for the purposes that are eventually specified by the Technical Committee.

*’ The federal district’s education system is administered by the SSSEDF, a federal agency. For the purposes of the Project, the federal district will be treated as a state.

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5 . The responsibilities of the FNEC Technical Committee are the following:

(a) Instruct Trust Administrator to distribute 94 percent of FNEC funds to the governments of the states and the SSSEDF, in accordance with the Program Operating Rules;

(b) Receive statement of accounts presented by Trust Administrator on the operations of the FNEC;

(c) Instruct the Trust Administrator to open specific sub-accounts in the FNEC in order to differentiate federal funds from other funds that eventually are deposited in the Trust;

(d) Provide the Trust Administrator with the information it requires; and (e) Ensure the all necessary conditions for the achievement of the Trust objectives.

6. The structure and operation of the state level FEECs is similar to that of the FNEC. The funds deposited in the FEECs include the federal transfers from the FNEC, the funds contributed by the states and the Federal District to the Program, any other contribution received for the Program, as well as the earnings accruing from investments of the Trust capital. The state technical committee is entirely composed of officials from the state’s government.

7. specific provisions on detailed arrangements for the carrying out of the Project, including:

PEC will develop an OM, that is satisfactory to the Bank, containing among PEC others,

(a) The Project’s procurement, disbursement, and financial management requirements; (b) The Indigenous People’s Plan; (c) The key performance indicators; (d) The PEC operational rules, including: (a) the different type of School Grants to be

provided under PEC; (b) the conditions for schools to receive grants under PEC; (c) the selection criteria and priorities to be followed by the AEEs in the award of School Grants (including Eligible Schools with students which come from families that benefit from the Oportunidades Program); and (d) the criteria for the school plan;

(e) The environmental and health regulations to be observed in case minor construction or rehabilitation activities need to be carried out in the context of School Grants; and

(9 Transparency and anticorruption provisions, including a provision stating that part of the funds for the PEC are provided by the Bank and therefore establishing audit, information and investigation rights which the Government shares with the Bank.

8. PEC may not amend the OM without the prior agreement from the Bank. However, PEC may modify the section of the OM that includes the PEC Operational Rules when the modifications do not adversely affect the performance or the objectives of the Project.

9. The states carry out the Program within their jurisdiction, through the AEEs. The states have the responsibility to define the strategy to carry out the Program and may introduce additional Program rules and procedures provided these are compatible with the Program Operating Rules. The specific functions of the state education authorities in the implementation of the Program are to:

(a) Submit to SEP, every year, a written confirmation of their willingness to participate in the Program and of the amount of funds they would allocated for the Program;

(b) Administer Program activities including public announcement of Program Operating Rules and application procedures, reception of applications submitted by interested

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schools, provision of technical assistance to schools for preparation of PETEs, qualification of school proposals, selection of schools, transfer of school grants to the bank accounts of the selected schools, and the carrying out staff training;

(c) Monitor, disseminate, and evaluate the Program; (d) Administer the state PEC Trust Funds (FEECs); (e) Propose state-specific criteria for school selection and resource allocation that are

(f) Support the professional development of teachers and school principals, through training

(g) Finance the administration of the Program using a maximum of 20 percent of the state

(h) Prepare Program supervision reports; and (i) Administer PEC national management information system and provide advice to schools

compatible with the Program Operating Rules, if warranted;

programs;

share of Program funds;

on how to use the system.

10. PEC will enter into a separate Coordination Agreement, satisfactory to the Bank, with each state. Through the Coordination Agreement, each state will agree to provide, in a timely manner, the funds required for implementing the Project and will agrees to carry out the Project. Each Coordination Agreement will be duly authorized and will be legally binding on SEP and each state.

11. The General Directorate of Management Development and Education Inovation (Direcidn General de Desarrollo de la Gestidn e Innovacidn Educativa, DGDGIE)26 would be responsible for the implementation of the Program and its coordination nationwide. To this end, the DGDGIE has the following specific responsibilities:

(a) Define and interpret the Program Operating Rules; (b) Monitor Program objectives, goals, processes and timetables in coordination with the

state education authorities; (c) Administer federal Program funds through FNEC and supervise the allocation of

Program funds to the states; (d) Support the carrying out of the Program by the states and ensure that state comply with

the Program Operating Rules; (e) Train state technical staff involved in the Program; (f) Advise states on strategies for Program dissemination; (8) Monitor the process of school registration, technical assistance, evaluation of proposals,

selection of schools, and school grant awards and use of school grants, carried out by the states and the participating schools;

(h) Encourage states to implement professional development programs for school principals and teachers, and for members o f the State Education Council for Social Participation (Consejo Estatal de Participacidn Social en la Educacidn-CEPSE);

(i) Operate and develop PEC national management information system (or issue accreditation for alternative information systems) and utilize the information system to monitor Program operations at state and school levels;

(j) Design and carry out national Program dissemination campaigns;

At the national level, the DGDGIE is responsible for the development of innovative projects and programs with

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26

the purpose of improving the school performance and student’s learning achievements.

(k) Carry out external and internal Program evaluations with the support of SEP's General Directorate of Evaluation (Direccih General de Evaluacidn, DGE) and the INEE, among others; and

(1) Finance the national operating costs of the Program using not more than six percent (6 percent) of the annual PEC budget.

12. The DGDGIE provides operational and academic assistance to the state education authorities through a small central network of academic and operational support officers (Coordinadores Acadbmicos, Coordinadores Territoriales, and Coordinadores de Informacidn y Andlisis) assigned to the Program. Members of this team are allocated to the five regions of the country (Northwest, Northeast, Pacific, Southeast and Central) to oversee Program implementation and maintain direct contact with academic and operational state officers working on the Program. This national team fulfills its implementation support functions through visits to states, seminars and workshops designed to promote the continuous development of state-level PEC technical staff; and through regional and national meetings.

13. The management instruments used by the DGDGIE to coordinate the Program are the State Agenda for Strategic Management (Agenda Estatal de Gestidn Estratigica) and its state equivalent, and PEC national management information system. The Agenda is updated yearly and describes the activities to be carried at state level, highlighting key processes and timetables that provide benchmarks for the coordination of Program nationwide. PEC national management information system processes and consolidates information on Program operations based on data supplied by federal and state agencies, and by the participating schools. This system helps to ensure compliance with the Operating Rules and to identify eventual implementation problems.

14. In order for a school to receive a School Grant, the school will comply with an agreement with the relevant state and the school agrees to use such proceeds solely for the relevant provisions of the OM and to allow audits and review of records on the use of such proceeds. PEC will exercise its rights and carry out its obligations under the Coordination Agreements in such manner as to accomplish the purposes of the Loan.

15. PEC expects to strengthen its relationship with the Oportunidades Program, administered by the Secretariat of Social Development (SEDESOL). Oportunidades is a conditional cash transfer program that gives support to poor families with students who attend school. As a demand-based program, Oportunidades has recourse to ensure education quality and hence is interested in partnering with programs that focus on school quality. Thus there is a natural synergy between PEC and Oportunidades. PEC plans to work with Oportunidades to identify which schools have a high proportion of students receiving support from Oportunidades. These schools will receive preference when they apply to join PEC. This collaboration will be carried out at the technical level, through informal agreements between the two agencies.

16. PEC will work with the National Council for Educational Development (CONAFE) to enhance its targeting and effectiveness. This collaboration will include efforts to harmonize rules to ensure that schools with CONAFE support can participate in PEC. This coordination will be carried out on the technical level and it is expected that an agreement will be signed between the two agencies outlining changes in relevant rules of operation.

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Annex 7: Financial Management and Disbursement Arrangements MEXICO: School Based Management Project

1 . Introduction. This annex documents the Financial Management (FM) Assessment of the School Based Management Project (PEC by its acronym in Spanish). The assessment was conducted by Bank staff in accordance with OP/BP 10.02 and Guidelines for Assessment of FM Arrangements in World Bank-Financed Projects.

2. Summary. PEC involves a considerable level of complexity, including: (i) transfers from the federal Government to state governments to schools, (ii) several dispersed spending units with a large number of small transactions, and (iii) the flow of information between schools, states, and the project implementation unit at the central level was not optimal during the first phase of the Program. These factors, together with the size of the proposed operation, make the inherent FM risk Substantial.

3. There are a number of mitigating control factors described in this Annex, which include: (a) The strong country public FM arrangements that will be used for this project given

the fact it will be integrated into the national budget. The Bank will reimburse eligible expenditures recorded under earmarked budgetary lines;

(b) Regarding the School Grants (disbursement category 1) PEC operates under a well defined set of operating rules, which among other aspects, describe the most relevant operational and financial controls applicable to the program, as described in the Internal control and internal auditing section;

(c) The project’s implementation unit (DGDGIE) has implemented a number of mechanisms that are expected to ensure the adequate flow, integrity and reliability of the program’s operative and financial information;

(d) In addition to the reviews conducted by the independent external auditing and the internal control unit of SEP, the supreme audit institution regularly conducts performance, financial and compliance audits on the program; NAFIN, as financial agent, will provide support on the main fiduciary-related issues; The administrative staff of DGDGIE has considerable years of accumulated experience with Bank FM related policies and procedures, as it is the same team that was in charge of FM matters during the implementation of the first phase of this APL.

4. The Bank will carry out a supervision strategy involving at least one full FM supervision mission per year, and desk reviews of interim and annual financial statements of the project. Hence, the residual FM risk, i.e. the inherent risk as mitigated by existing controls, is modest. It is worth mentioning that the phase 1 of PEC which closed on December 3 1, 2009, was rated as Moderate for the overall risk, and Moderately Satisfactory in the last ISR. 5. The Project FM arrangements, as described herein, are consistent with Bank policy. The agreed action pending implementation is to ensure the Project FM Manual is updated according to the changes in the new phase of the Program.

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Description and Assessment of Project FM arrangements

6. Country issues relevant to the Project. In general, public financial management in the Mexican federal administration relies on strong budgeting, treasury, accounting and control systems. These FM country systems apply to Project transactions because Bank-financed operations form an integral part of the public budget and are executed accordingly. Moreover, specific financial reporting and auditing arrangements for projects financed by multilateral international institutions have been agreed with the Government.

7. Secretariat of Basic Education (Subsecretaria de Educacibn Bdsica, SEB) at SEP.

Implementing entity. PEC is implemented by DGDGIE, which is part of the Under-

8. Within the organizational structure of the DGDGIE the unit in charge of fiduciary aspects of the Project is the FM Project Unit, which was created to coordinate the fiduciary matters for the first phase of the Program, and will continue with this assignment during the second phase of the Program. The staff in this unit has extensive expertise in managing bank financed projects, and no incremental staff would be required for Bank FM purposes.

9. Financial administration. NAFIN will act as financial administrator and financial agent of the Borrower with regards to the Loan. Based on its many years of experience with Bank- financed projects, NAFIN will function as an intermediary between the Bank and the DGDGIE’s FM Project Unit managing the loan disbursement processes and providing implementation support and oversight.

10. Budgeting arrangements. Funds for PEC are allocated into the Federal Expenditure Budget (PEF). Thus, its operation is subject to provisions of the annual PEF Law, the Federal Budget and Fiscal Responsibility Law, the Government Accounting Law, the Manual of Budget Procedures, and others. This set of legal and regulatory arrangements, together with their implementation systems, provides for sound budget formulation, execution and control arrangements. The budget approved by the Mexican Congress for PEC was for MX$1,500 million in 2009 and MX$ 1,477 million in 201 0.

11. As per usual practice in Mexico, the Government will pre-finance the Project and the Bank will subsequently reimburse eligible expenditures recorded under budgetary lines earmarked for the Project (digito 2).

12. Counterpart funds are part of SEP’s standard budget which will be used to complement Bank’s funds and will be respectively registered in the standard budget in separated budgetary lines earmarked for the Project. PEC is financed jointly by the federal and state governments. Some school communities make addition contributions in cash and in-kind, which are optional and normally small.

13. Accounting system. SEP will maintain records and accounts adequate to reflect its operations and financial condition, in accordance with accounting practices compatible with International Accounting Standards and in compliance with local requirements, including records and separate accounts for the Project. Administrative procedures are in place to ensure that financial transactions are made with consideration to safeguarding project’s assets and ensuring proper entry in the accounting and monitoring systems.

52

14. Historically all the operational information of the program (which is the base for the financial information) flowed through the information system SIPEC , however, this system is only fully implemented in 19 states, and it is partially used in 8 states, and not used in 5 states, which caused considerable delays in the release and process of information during the first phase of the program.

1 5 . In order to ensure consistency, reliability and timely delivery of the information provided by the states that do not use or partially use the SIPEC, the DGDGIE has established alternative mechanisms and controls, which will be in use for the second phase of the PEC and in summary consist on the following: (i) a pre-certification of the methodologies and systems that will be used by the states that do not use SIPEC, (ii) periodical reconciliation of figures that will be carried out at the central level. 16. In addition to PEC national management information system, there are a number of systems which are used by SEP for its regular operation, and are considered satisfactory to the Bank. These systems are the following: (a) SIAFF (Federal Integrated Financial Management System) for the financial operation and budgetary control between SEP and SHCP; (b) SIPPAC (Budget, Payments, and Accounting System), for the financial operation and budgetary control of SEP; (c) SIAPSEP (SEP Integrated Human Resources Management System) for staffing; and (d) COI (Integrated Accounting System) for the accounting of the PEC. 17. The COI accounting system has the capacity to record assets, liabilities and financial transactions, and to produce financial statements and reports required to SEP’s programs management. In addition, Interim and Annual Financial Reports are produced in spreadsheets (Excel), based on information and reports produced by the existing systems. SEP is responsible to keep files of the project’s expenditures supporting documentation, except for the expenditures related to Component 1, in which SEP’s responsibilities are to coordinate the filing of the supporting documentation at the sub-national level. The FM section of the OM will provide details on accounting policies and procedures.

18. Internal control and internal auditing. In addition to the budget regulations and procedures mentioned above, PEC is subject to its own Operational Rules and to the Federal Public Administration Internal Control Standards issued by the Public Administration Ministry (SFP), which as a whole provide for sound internal control arrangements for the Program.

19. The operational controls of the program are described in the operating rules and are based mainly on the interaction between different actors at the state and central level. The following are the most relevant:

(a) The school parents’ associations are involved at various level of the program’ operation, such as the planning in the use of the resources, and the authorization of payments related to school grants.

(b) At the end of each school cycle, each program’ beneficiary school must prepare and submit to the CGEPEC (Coordinacibn General Estatal del PEC, by its name in Spanish) a report with the details of the use of financial resources. Each school is responsible for keeping the files of the expenditures’ supporting documentation. With the information received from all the state schools, the CGEPEC is responsible for consolidating and preparing financial and physical monitoring reports including all the

53

expenditures of the project, which in turn are delivered and reviewed by the CNPEC (Coordinacidn Nacional del PEC, by its name in Spanish).

(d) The State Education Authorities ( A utoridades Educativas Estatales) are responsible for: (i) ensuring that each school in the program must have adequate mechanisms to manage PEC’s funds, among other measures all checks must be signed by the school’s director and by a representative of the Parents’ Association, (ii) oversee the adequate integration of the expenditures files.

20. The internal auditing function is carried out by SEP’s Internal Control Unit (OIC), which reports to SFP and must follow the Public Audit Standards and Guidelines issued by SFP. The latter also approves the OIC’s annual work programs, oversees its operation, and receives its audit reports. Good systems are in place for timely follow-up to internal audit observations and implementation of recommendations. No incremental actions or staffing would be required for Bank FM purposes.

General flow of funds

21. Except for the front-end fee, for which the Bank shall withdraw funds from the loan account on behalf of the Mexican Government, the loan will be disbursed in US Dollars into a bank account opened by NAFIN. These funds will be transferred into a US Dollar account at the TESOFE. TESOFE shall use those funds in accordance with applicable Mexican laws. TESOFE, through its annual budget laws and mechanisms and will transfer to SEP an amount equivalent to the amount disbursed in dollars under the loan to finance eligible expenditures.

22. The primary disbursement method for this project will be Reimbursement SHCP will pre- finance the total Project spending passing through the standard budget of the implementing unit at SEP. The National Treasury (TESOFE, an Undersecretariat at SHCP) will transfer funds to SEP in local currency (Mexican Pesos) via its standard budget for PEC. SEP will: (a) pay to suppliers of goods and services for the implementation of the Project components; and (b) transfer funds to participating schools through a national trust fund (FNEC) which will then transfer funds to the participating state trust funds (FEECs) for the implementation of Category 1. The Bank will reimburse the funds in USD into a commercial banking account opened by NAFIN, which in turn will transfer the resources to the TESOFE.

23. shown below illustrates and provides details on the proposed flow of funds and information.

The advance disbursement method may also be used for this project. The flowchart

54

1 1 1 1

I I

I 10 , I

SEP (DGDFIE)

I I I 7

I I 1 ' 8 ,I

FNEC (commercial

Systems

commercial banks)

l 4

Suppliers i

Municipalities ru School Bank

55

:4. Disbursement arrz Disbursement method

Number 1

Advance method

Amount of the Yo of Loan allocated Expenditures Recognition of

Category Description (USD) to be Financed expenditures Goods, Works and Consultant Services 2 1 1,720,000 90 Transfer from financed under School Grants

Supporting documentation

2

3 4

Type of designated account Currency of the designated account Retroactive expenditures

accounts Operating costs 3,300,000 100 Payment to

suppliers of goods and services

Consultant services 4,430,000 100 Front-end fee 550,000 100 Total 220,000,000

25. Disbursement Table

gements. The loan disbursement arrangements*’ are hereby summarized: The following disbursement methods may be used under the loan:

Reimbursement. Advances

Given the fact that the currency requested for the DA is USD, and all the expenses of this project are expected to be made in pesos, the applicable Exchange Rate will be the market rate corresponding to the date of the withdrawal of funds from the DA. The Bank will disburse against IFRs, in which SEP will request the loan resources according to the project’s cash flow needs for the following quarterly period.

Direct Payment (not available for Category 1) In case that the Advance method is used, the following will apply:

. Quarterly Interim Unaudited Financial Reports (IFRs)” that will include the following information:

Advance(s) received during the reporting period.

designated account. . Unused advances reconciled against the outstanding balance of the

A projection of the resources needed for the following quarterly period. . . The Exchange Rate used for conversion purposes. Pooled US$

Eligible payments must meet the following conditions: . Retroactive period covers eligible expenditures made between June 30, 2009 and the project signing date, but not more than twelve months prior to the signing date. . That do not exceed 20 percent of the loan amount. . The retroactive expenditures would be subject to the same systems, controls and eligibility filters described above. Those expenditures would also be subject to the regular Project external audit (see below).

State Trust Funds to School Banks

*’ For details, please see the Disbursement Handbook for World Bank Clients. 28 All expenditures supporting documentation will be available for review by the external auditors and Bank staff at all time during project implementation, until at least the later of (i) one year after the Bank has received the audited Financial Statements covering the period during which the last withdrawal from the Loan Account was made; and (ii) two years after the Closing Date. The Borrower and the Project Implementing Entity shall enable the Bank’s representatives to examine such records.

56

26. Disbursements for payments for goods, works and consultants? services under School Grants shall not be made unless the respective State has agreed to comply with the transparency provisions as documented in the Interim Financial Report (IFRs). Compliance with this condition will be required by each individual State and this condition will be considered complied with on an individual basis (i.e. it is not required that all States have complied with this condition in order to start disbursing funds under the relevant category).

Report Semester unaudited Project IFRs Annual audit report on Project financial statements and eligibility of expenditures

27. Financial reporting. The FM Project Unit of DGDGIE will use its accounting system, as described earlier, to prepare the semester Project unaudited IFRs and the annual audited Project financial statements. These reports will be prepared on a cash basis using the standard formats agreed with the SFP for the Mexico portfolio.

Due date Within 45 days after the end of each calendar semester. Within six months after the end of each calendar year of loan disbursements (or other period agreed with the Bank).

28. The IFRs will be prepared in local currency (Mexican pesos) reflecting the sources and uses of funds of the project considering the Bank and Government share cost only with regards to the federal contributions, in consistency with the project cost information included in the different sections of the PAD (e.g. Annex 5).

29. The eligible expenditures reflected in the IFRs will be the following: For Category 1 : the funds transferred during the reporting period from state trust funds to school bank accounts.

0

0 For the other categories, payments made during the reporting period to suppliers of goods and services, (Le. actual expenditures).

30. DGDGIE to NAFIN for further submission to the Bank, as follows:

After loan effectiveness, the financial reports will be presented by the FM Project Unit of

31. External audit. Annual audits on Project financial statements and eligibility of expenditures will be performed in accordance with Bank policy, as reflected in the audit terms of reference and memorandum of understanding agreed between the Bank and SFP. The Project audits would be conducted by a private firm or the SEP?s OIC as designated by SFP, which should be acceptable to the Bank. The audit report will be furnished to the Bank, through NAFIN, as soon as available, but in any case not later than six months after the end of each audited yeadperiod. Given the nature of this project, in addition to the application General Terms of Reference referenced above, specific TORS (Terms of Reference) will be designed for the annual financial audit, which will require independent auditors to provide an opinion on the use, by eligible schools which received funds as School Grants from disbursement category 1, and of loan proceeds and actual expenditures for Goods, Works and Services, as applicable. The audit report should also confirm that individual schools and educations grants did not exceed the amount established in the Operating Rules of the Program.

32. There are no overdue audit reports for the phase I of this project. The last audit report of the first phase of the Project (covering the period from January 1 , 2008 to December 3 1, 2008)

57

was delivered on a timely basis to the Bank. The audit was conducted by OIC of SEP, which issued an unqualified opinion (clean) on the financial statements of the Project, and it was found to be acceptable to the Bank.

33. by its order

Written Procedures. As the Program is currently in operation it is governed primarily annual Operating Rules, and by the Project’s OM, which will require some adjustments in to reflect the changes between the phase 1 and phase 2 of the Program (e.g. to include the

new categories), and will probably need to be updated to reflect the controls that were implemented to ensure the integrity and reliability of financial information for the states that do not use the SIPEC system. These changes in the OM are expected to be concluded before negotiations.

34. residual risk is considered modest, as explained in the following table:

Risk assessment. On the basis of the Bank’s Project FM assessment, the overall FM

5 8

Risk typez9

Inherent risk Country level Entity

Risk Rating

Project

Comments / Risk mitigating measures incorporated into Project design

Control risk Budgeting

_.- M

Accounting

The Project will be implemented by the DGDGIE that has considerable experience in Bank-financed projects from both technical and FM sides. SEP also demonstrated to

Internal Control

Overall risk M Non-standard conditions Bank FM supervision

Residual risk

Funds Flow

(ii) periodical reconciliation of figures that will be carried out at the central level.

annual audit on Project financial statements and expenditure eligibility.

A full FM supervision mission per year, which will look into the operation of the control systems and arrangements described in this annex, including but not limited to the beneficiary payments system, the reconciliation process, and the eligibility filters. Desk reviews of IFRs and audit reports.

Financial Reporting

FM Risk Table I

I have a strong in&&tional capacity. I The Program involves a considerable level of complexity, including: (i) transfers from S

the federal Government to the state governments to schools, (io several dispersed

the SIPEC, the DGDGIE has established alternative mechanisms and controls, which are expected to ensure a consistency in the information such as: (i) a pre-certification of the methodologies and systems that will be used by the states that do not use SIPEC,

Residual Risk

Rating M M M

M

M

M

M

M

M

M

M

M

29 The FM inherent risk is that which arises from the environment in which the project is situated. The FM control risk is the risk that the project’s FM system is inadequate to ensure project funds are used economically and efficiently and for the purpose intended. The overall FM risk is the combination of the inherent and control risks as mitigated by the client control frameworks. The residual FM risk is the overall FM risk as mitigated by the Bank supervision effort.

59

Annex 8: Procurement Arrangements MEXICO: School Based Management Project

A. 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, and revised in October 2006; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 and revised in October 2006, as well as the provisions stipulated in the Legal Agreement. The general description of various items under different expenditure categories is described below. For each contract to be financed by the Project, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank Project team in the Procurement Plan. The Procurement Plan would be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.

2. The Secretariat of Public Education (SEP), the Inter-American Development Bank (IADB) and the Bank have agreed on harmonized standard bidding documents for goods and works under National Competitive Bidding (NCB) and International Competitive Bidding (ICB) as well as a Request for Proposal (RFP) for consultant services. These documents are to be used by all purchasing entities for all procurement financed by the Bank.

3. As in the first phase and given the nature of this Program, most of the procurement actions are made by eligible schools with the supervision of the PEC AEEs which receive transfers from the Federal Government through the states’ PEC trust funds (FEECs). The procurement actions at this level include small works, goods and training for the teaching staff. Each school shall include these actions in an Annual Work Program. The methods to be used for the procurement of goods and services under the loan are described below with the estimated amounts, and summarized in Table A suggests thresholds to be used in the Procurement Plan and the OM for the various procurement methods.

4. Procurement of Works. Small works would be procured by schools under Category 1 “School Grants.” These works include construction and improvement of learning and sanitary facilities, minor repairs, and maintenance works. It is estimated that the resources allocated for improvement including works under each school would not exceed the equivalent of US$ 7,500- 9,000 per year including the contribution of the school community. These works would be generally procured through shopping (including price quotations from local contractors).

5. Procurement of Goods and Non-Consulting Services. Sundry goods and small value items, including didactic materials and furniture would be procured by the schools under Component 1. These items would be generally procured through shopping (including price quotations from local suppliers).

6. Non- consultant services would also include cost associated with training, logistics, organization of seminars, workshops, printing, materials reproduction, publication and dissemination related activities as included in the Procurement Plan.

60

7. outsourcing the service or upgrading the equipment.

It is expected under Component 2 the improvement of the information systems by

8. Employment of Consultants. Consultant services would include technical assistance to improve information systems, audits and advisory services and technical consultant services for policy studies and Program evaluation. The short list of consultants, estimated to cost less than US$500,000 equivalent per contract, may comprise entirely national consultants, in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

9. Most contracts for firms would be procured using Quality- and Cost-Based Selection (QCBS). Consultant assignments of specific types as agreed previously with the Bank in the Procurement Plan may be procured with the use of the following selection methods: (i) Quality Based Selection (QBS); (ii) Selection under a Fixed Budget (SFB); (iii) Least Cost Selection (LCS); (iv) Selection Based on Consultants’ Qualifications (CQS), and, exceptionally (v) Single Source Selection (SSS), under the circumstances explained in paragraph 3.9 of the Consultants’ Guidelines. The harmonized RFP must be used.

Firms:

10. Individuals. Specialized advisory services would be provided by individual consultants selected through comparison of qualifications of at least three qualified candidates. They would be contracted in accordance with the provisions of paragraphs 5.1-5.4 of the Consultant Guidelines as defined in the procurement plan.

1 1. Prior Review Thresholds. The prior review of procurement actions would be defined in the annual procurement review and would not exceed the thresholds determined by the procurement capacity assessment of SEP summarized in Table A and would be further defined in the Procurement Plan.

12. Operational Costs. Operating Costs means the reasonable costs related to (i) conferences, workshops and training related expenditures (including space and equipment rental, and utilities), (ii) transportation and supervision costs (including reimbursement of travel costs and reasonable per diems), (iii) dissemination costs (including printing costs, and public events), and (iv) minor office supplies.

B. Assessment of Capacity and Risk to Implement Procurement

13. An assessment of the capacity of SEP to implement procurement actions for the Project has been carried out by the PAS assigned to the Project in July 2009. As a result of the capacity assessment, the Bank defined the procurement implementation risk as Substantial considering: (a) Although staff at the PEC unit have developed experience with Bank’s procurement, procurement implementation involves several layers of management and supervision; (b) at the school level there are several thousand units carrying out procurement actions; and (c) for expenditures under Component 1, which is the largest, there would be no prior review by the Bank. In the past few years SEP has developed its procurement implementing capacity which is considered to be enough as the procurement under the program is not complex. The risk on procurement would be mitigated with:

61

Activity When

Procurement and SEPA training

Procurement consultant

OM

Responsible

Bank

SEP

SEP

First Quarter of implementation

During first quarter on implementation

Before Negotiations

C. Procurement Plan

14. The Plan covering the first 18 months of Project implementation would be prepared by SEP. With respect to Component 1, this Plan shows the total amount that is expected to be transferred from the national trust fund (FNEC) to the state trust funds (FEECs) to finance school grants. This Plan was approved by the Bank on April 14, 2010. Subsequently, as needed during project implementation but not less than once a year, the Plan shall be updated to reflect, among other things, the use of grant funds by the participating schools which is reported by the schools as part of their PAT that is presented to the PEC State Coordinating Units (Coordinacidn Estatal). The Procurement Plan will be available at project's files. It will also be available in the project's database, in the Bank's external website and in SEPA.

D. Frequency of Procurement Supervision Missions

15. capacity assessment has recommended two full supervision missions per year.

In addition to the prior review and ex-post supervision to be carried out by the Bank, the

Table A: Thresholds for Procurement Methods and Prior Review'

Contract Value Contracts Subject to Type of Expenditures Threshold Procurement Method Prior Review

(US$) (US$ millions) 1 .Goods >3,000,000 ICB (not expected) All

< 1,000,000 NCB All <100,000 Shopping None

2. Consultant Firms >200,000 QCBSIQBSRSBLCSICQS All <100,000 QCBSlQBSlFSBLCSlCQS None

Individuals Cons. >50,000 IC All <50,000 IC None

'To be reviewed and confirmed in the review of the procurement plan annually.

62

E. Details of the Procurement Arrangements Involving International Competition

1. Goods and Non-Consulting Services

(a) List of goods and non-consulting services: None expected.

(b) All direct contracting would be subject to prior review by the Bank

2. Consulting Services

(a) List of consulting assignments with short-list of international firms. None expected.

(b) Consultancy services (firms) costing above US$500,000 would be subject to prior review by the Bank. Consultant services (individuals) costing above US$200,000.00 would be subject to prior review by the Bank. All single source selection of consultants would be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Services estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

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Annex 9: Economic and Financial Analysis MEXICO: School Based Management Project

A. Summary

1. This Annex analyzes the impact of PEC on the basic education system and the Mexican economy from various angles. The Annex reviews the initial economic analysis prepared for the APL to confirm its relevance for the second phase of the Program. The results show that PEC has the potential to improve the quality and equity of the basic education system. Given the current economic recession in Mexico, the annex considers PEC’s impact on the fiscal situation.

B. Education and the Mexican Economy

2. The Mexican economy was severely affected by the global economic and financial crisis. As a relatively open economy, Mexico was hard hit by the collapse of international trade during the last quarter of 2008 and the first quarter of 2009. As a result, annual economic growth in 2008 was down to 1.3 percent and GDP fell by 6.5 percent in 2009. The contraction of economic activity led to a sharp decline in tax revenue that was partially compensated by non- recurrent revenue in 2009. Non-oil tax revenue dropped by 11.5 percent in real terms in 2009 while Value Added Tax revenue fell by 15 percent. The Government compensated for lower oil and non-oil budget revenue with resources from a successful oil price hedge, an extraordinary transfer of profits from the Central Bank, and drawing resources from the Government’s revenue stabilization funds. The Government has protected the budget of the education sector and the federal budget for 2010 shows the education sector was largely spared from cuts that affected other sectors.

3. The main economic shocks impacting the Mexican economy are:

a. Weaker external demand. Mexico’s economy is tightly linked to the United States, which is the destination of approximately 80 percent of exports. While the United States has begun an economic recovery, the recovery appears to be weak which will have slow growth in Mexico going forward.

b. Low oil prices. Mexico is a major oil producer and benefited greater from the historically high oil prices in 2007 and 2008. The dramatic drop in the price oil affects both the real economy and Government revenues. Although oil prices have partially recovered from their lows, they are still well below peak levels.

c. Lower worker remittances. Worker remittances, primarily from Mexicans in the United States, have already started to decline. In 2008, remittances were 3.6 percent below 2007 levels. Initial reports suggest that these declines accelerated in 2009.

d. Lower access to external and domestic credit. Mexican firms and the Mexican Government in recent years have relied on external financing sources to supplement domestic borrowing. These sources have largely dried up. At the same time, Mexican banks, which are largely foreign owned, have also reduced their lending due to a lack of liquidity.

64

e. The outbreak of influenza M l N l . The influenza outbreak in the second quarter of 2009 has fbrther slowed demand and reduced tourist and business visits to Mexico. While no estimates are available, similar outbreaks in Singapore, China (including Hong Kong SAR), and Toronto, Canada show that there can be a sharp, short term decline in demand and economic activity. These previous outbreaks happened in period of global economic growth and the recovery was relatively rapid.

4. The Mexican Government implemented counter-cyclical fiscal stimulus policies to mitigate the impact of the external demand shock on the domestic economy. The fiscal stimulus policies adopted include additional public investment in infrastructure incorporated in the 2009 budget as well as employment programs, a reduction and freeze of public sector administrated prices in the energy sector, and an expansion of development banks’ credit programs. The economic recession is leading to significantly lower tax revenue which restrains the Government from continuing with major fiscal stimulus beyond 2009. During the first quarter of 2009, non-oil tax revenue dropped by 11.4 percent in real terms while Value Added Tax revenue plummeted by 21.2 percent. In its budget projections for 2010 the Government proposes to maintain the same level, in real terms, of programmable budget expenditures as in 2009 while maintaining similar public sector deficit targets as for 2009, 1.8 percent and overall Public Sector Borrowing Requirements of 3.0 percent of GDP.

5. The education sector is the single largest public expenditure and has been protected by the Government. The education sector plays an important counter-cyclical force with its large workforce and its on-going infrastructure program throughout the country. Mexico’s experience in past economic crises show that while the demand for basic public education tends to stay steady or increase, particularly at the lower secondary level, the demand for higher levels of education is likely to come under pressure. The basic education system in particular needs to take actions to maintain education quality in the face of growing demand and possibly reduced budgets.

6. Spending on public education has remained relatively constant this decade. As shown in table A9.1 , the federal Government spends around 4.5 percent of the GDP (around 19 percent of its total budget) on public education, including direct spending by SEP and transfers to the states for education. Spending on basic public education accounts for around 3.0 percent of the GDP and 12.5 percent of the federal budget.

65

Year 200 1 2002 2003 2004 2005 2006 2007 2008

7. PEC is a relatively important program for the Federal Government, accounting for around 0.3 percent of federal spending on basic education. This is significant, given the large proportion of spending that is dedicated to teachers’ salaries and benefits. On a per capita basis, this represents about 74 pesos (55 pesos from the Federal Government and 18 pesos from the state governments) per person in the target group of youth between the ages of 4 and 14 years old. PEC is one of the few programs in Mexico that transfers money directly to schools.

Education, Education, Basic Education, Basic Education, % of budget % of GDP % of budget Yo of GDP

18.8% 4.3% 12.2% 2.8% 18.3% 4.3% 12.1% 2.9% 19.0% 4.6% 12.7% 3.1% 19.7% 4.6% 13.3% 3.1% 19.6% 4.6% 13.2% 3.1% 18.7% 4.6% 12.4% 3.1% 17.4% 4.5% 11.7% 3.0% 17.5% 4.3% 11.7% 2.9%

C. Review of the Program Economic Analysis

8. The Economic Analysis in the Project Appraisal Document (PAD) for Phase I shows a strong rationale for investing in the Program. The analysis shows that based on the literature, the rate of return for basic education ranged from 10 percent to 20 percent. The rates of return to education have been is declining with time. Since 2005, studies have shown that the rate of returns to education continues in the same range. The recession has probably further lowered the rates of returns for people with lower levels of education as they are more likely to be unemployed for a longer time.

9. Decentralizing decision-making authority to parents and communities may lead to schools aligning their priorities and values with their c o m m ~ n i t i e s ~ ~ . The arguments for increasing parental participation in the school is that this will help teachers to focus more on children’s learning more and support the flow of human, financial, and material resources to the school by virtue of parental support. In a SBM model, responsibility and decision making over some aspects of school operations are transferred to parents, who must conform to, or operate within, a set of centrally determined policies (Caldwell 2005). SBM emphasizes the individual school (as represented by a combination of principals, teachers, parents, students, and other members of the school community) as the primary unit for improving education, and the redistribution of decision-making authority over school operations as the primary means by which this improvement can be stimulated and sustained. The potential benefits of SBM may include:

0

0

0

More input and resources from parents (whether in cash or in-kind); More effective use of resources since the decisions are based on school needs; Better-quality education due to a more efficient and transparent use of resources;

This has been discussed in several recent studies prepared by the World Bank, including World Bank (2008a) and 30

World Bank (2008b). 66

0

A more open school environment due to community involvement; Increased participation of local stakeholders in decision-making processes, leading to a more collegial relationship; and Improved student performance as a result of reduced repetition rates, reduced dropout rates, and better learning outcomes.

10. The empirical literature on SBM points to some impact on enrollment, dropout rates, parental involvement, and student achievement. Parental involvement generally increases (Jimenez and Sawada 1999, 2003; Di Gropello 2006; Drury and Levin 1994). Teacher effort, measured by days worked or the number of parent-teacher meetings, also increases in some cases (Di Gropello and Marshall 2005; Di Gropello 2006). Despite rapid expansion of a SBM program in El Salvador (the EDUCO program), which gives Parent’s Associations the responsibility for hiring, monitoring, and dismissing teachers, education quality was comparable to traditional schools (Jimenez and Sawada 1999, 2003). EDUCO students tend to be poorer and located in rural areas. Two evaluations of Nicaragua’s Autonomous Schools, which gives school councils (of teachers, students, and parents) the authority to determine how school resources are allocated and to contract principals, found that decisions the school level contributed to better test scores (King and Ozler 1998; Ozler 2001). In a number of diverse countries such as India, Nicaragua, and Papua New Guinea, parental participation in school management has been associated with reduced teacher absenteeism (Patrinos and Kagia 2007; Karim, Rodall, and Mendoza 2004). Reducing teacher absenteeism is likely to lead to higher education quality.

1 1. Several recent studies have shown the relevance of PEC. PEC was first analyzed using panel data regression analysis and propensity score matching by Skoufias and Shapiro (2006). They found that participation in PEC reduced dropout rates (decreased by 0.24 percentage points), failure rates (decreased by 0.24 percentage points) and repetition rates (decreased by 0.31 percentage points). A second quantitative evaluation conducted by Murnane et a1 (2006) found that PEC lowered dropout rates, but not failure rates. However, neither study analyzed the impact on student learning because there was not sufficient data. A qualitative evaluation of PEC by Loera (2005) found positive but not statistically significant effects on student learning only one and two years after the Program started (the higher impact was on schools with the poorest students). Santizo and Cabrero (2004) interviewed principals, teachers, supervisors, and parents and found low levels of social participation (participation in the school councils, in budget allocation, and in developing and implementing projects).

12. Other school-based management programs in Mexico provide additional evidence. The School Management Support Program (Apoyo a la Gestidn Escolar, AGE), which was created in 1996, is similar in design to PEC although it focuses on smaller rural schools and is operated through the Parent’s Association. AGE is the school-based management component of the Mexico’s education compensatory program, implemented by CONAFE. An evaluation of the whole program using propensity score matching found that participation in the AGE had significant positive effects on learning, as measured by test scores (Shapiro and Moreno, 2004). Lopez-Calva and Espinosa (2006) used matching techniques and found that participation in AGE had a positive impact on student learning. Likewise, Gertler et a1 (2006) used pre-program data over time to construct an over-time difference-in difference estimator to evaluate AGE, controlling for fixed effects, and found a positive effect on decreasing repetition and failure rates.

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13. The AGE program has also been studied through qualitative evaluations. Qualitative evaluations (surveys and interviews with parents, directors and teachers) by Patrinos (2006) and Gertler et a1 (2006) in Campeche, Guerrero, Michoacan, Sinaloa and Tamaulipas found that parents considered that AGE helped improve school participation and communication, school maintenance, motivate teachers, reduce absenteeism among teacher, increase student attendance and parents participation.

D. PEC's Contribution to Education Equity

14. Equity is a major issue in the education in Mexico. Schools located in highly marginalized or marginalized localities account for almost 40 percent of all country's basic ~chools .~ ' Nineteen percent of the basic education system schools are not categorized by marginalization level; it is not clear if this is because their localities are not included in the indexes or if the locality code is not properly matched with the school. The basic information is presented in Table A9.2, which compares PEC schools with all schools throughout the country.

Table A9.2: Distribution of Schools by Marginalization Level

Total Number YO of Cumulative Number YO of Cumulative

Marginalization of Total YO ofTotal ofPEC PEC YO ofPEC Level Schools Schools Schools Schools Schools Schools

Very High 17,114 8.8% 8.8% 2,066 5 % 5% High 59,799 30.9% 39.7% 10,245 26% 32%

Medium 23,603 12.2% 51.9% 5,400 14% 46% Low 24,498 12.6% 64.5% 6,762 17% 63%

Very Low 32,199 16.6% 81.1% 8,915 23% 86% Not Categorized 36,591 18.9% 100% 5,502 14% 100%

Total 193,804 100.0% 38,890 100% Note: Data based on 2005 CONAFE ranking of localities and

15. PEC schools tend to be in somewhat better off than the average school. A total of 32 percent of PEC schools are in highly marginalized or marginalized localities compared to 40 percent of schools as a whole. Likewise, 40 percent of schools are located in areas with low or very low levels of marginalization, compared to 30 percent of all schools. Figure A9.2 presents the same information graphically, comparing the distribution of all public schools in Mexico (figure on the left) to public schools in PEC (figure on the right).

Figure A9.1: Distribution of Schools by Marginalization Index - 4

,avid ,asic ;pone

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16. The distribution of students in PEC and non-PEC schools is quite similar, reducing the concerns about equity. Schools in poor areas tend to be substantially smaller than schools in other areas.32 When the measurement is made on a per student basis, it tends to increase the measurement of PEC schools cover 18 percent of the total enrollment of the basic public education system in Mexico. Of those students covered by PEC, 17 percent are located in schools categorized as marginalized or very marginalized while 5 1 percent of them correspond to non marginalized schools. For all schools, 18 percent are located in schools categorized as marginalized or very marginalized. Likewise, 52 percent are of students are in non-marginalized schools. Clearly, there is very little difference in equity as measured by the coverage of students. This suggests that PEC tends to focus on larger schools in all areas. As above, a large number of students are located in areas that have not been classified. These data are presented in Table A9.3. While PEC could improve the equity of its coverage, it has done a good job in reaching many poor schools.

Table A9.3: Distribution of Students by PEC and all Schools

Number of Yo of Number of Yo of Students total Students PEC Students PEC Students

Very High 572,596 3% 86,789 2%

Medium 1,922,405 10% 378,497 11% High 2,95 1,601 15% 539,875 15%

Low 2,728,307 14% 581,623 16% Very Low 7,575,349 38% 1,255,638 35% Not

Total 19,710,716 3,537,246 Categorized 3,960,458 20% 694,824 20%

17. In terms of resources, PEC appears to be relatively equitable. Data suggest that PEC tends to transfer more resources per capita to poorer schools. Although many smaller schools receive a smaller transfer, there is still a tendency to give similar sized payments to all schools regardless of the number of students that a school has. Since poorer schools tend to be smaller, this tends to benefit poorer schools more, as can be seen in figure A9.2.

32 It is important to point out that this analysis does not measure the number of poor and non-poor students that benefit from PEC. Current administrative data do not permit this distinction.

69

70

Figure A9.2: Distribution of PEC Resources on a Per Capita Basis

1200

1000

800

600

400

200

0

Very High High Medium Low Very Low Not Categorized

18. One of the primary goals of the second phase of the Program is to improve the equity of PEC. The second phase of the Program includes plans to expand the coverage of PEC by around 10,000 schools. This provides a good opportunity to expand PEC into more schools. Currently, the rules give some advantage to poorer schools. In the second phase of financing, these rules will be strengthened and additional programs will be developed to make it easier for the poorest schools to join the Program through the country. The analysis here looks at the potential impact of these programs to increase the coverage of PEC in poorer schools.

19. If the expansion focuses exclusively on the poorest schools, PEC would become significantly more equitable. The first scenario assumes that all of the expansion is targeted towards the poorest schools. The results of this analysis are in Table A9.4. Under this scenario, it is clear that PEC would be more equitable than the public school system as a whole. In this scenario, 46 percent of PEC schools would be in AGEBs with very high or high levels of marginalization, compared to 40 percent of all public schools. The biggest increase would be with the poorest schools.

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Table A9.4: Distribution of Students by PEC and all Schools under Scenario 1 Total

Total Cumulative Number of Cumulative Marginalization Number of YO of Total YO of Total PEC Yo of PEC Yo of PEC

Level Schools Schools Schools Schools Schools Schools Very High 17,114 8.80% 8.80% 7,066 14.5% 14.5%

High 59,799 3 0.90% 3 9.7 0% 15,245 3 1.2% 45.6% Medium 23,603 12.20% 5 1.90% 5,400 1 1 .O% 56.7%

Low 24,498 12.60% 64.50% 6,762 13.8% 70.5% Very Low 32,199 16.60% 81.10% 8,9 15 18.2% 88.7%

Not Categorized 36,591 18.90% 100% 5,502 11.3% 100.0% Total 193,804 100% 48,890 100%

20. If the expansion has a focus on poorer and average schools, PEC will still increase its equity. The first scenario is probably not realistic since there will continue to be strong demand from schools in richer areas. The second scenario assumes that PEC?s increase is concentrated in the poorer half of schools-all of the expansion is concentrated in areas with moderate, high, and very high marginalization. In scenario 2, 40 percent of PEC schools are in areas with high and very high levels of marginalization. This corresponds almost exactly to the 40 percent of all schools in high and very high levels of marginalization. There is still a bias towards the very poorest schools and overall the distribution of PEC schools is more equitable than before the Project.

Table A9.5: Distribution of Students by PEC and all Schools under Scenario 2 Total

Total Cumulative Number of Cumulative Marginalization Number of YO of Total YO of Total PEC Yo of PEC O h of PEC

Level Schools Schools Schools Schools Schools Schools Very High 17,114 8.80% 8.80% 6,066 12.4% 12.4%

High 59,799 30.90% 3 9.7 0% 13,245 27.1% 39.5% Medium 23,603 12.20% 5 1 .go% 8,400 17.2% 56.7%

Low 24,498 12.60% 64.5 0% 6,762 13.8% 70.5% Very Low 32,199 16.60% 8 1 * 10% 8,9 15 18.2% 88.7%

Not Categorized 36,591 18.90% 100% 5,502 1 1.3% 100.0% Total 193,804 100% 48,890 100%

21. Overall PEC contributes to the equity and governance of the education sector. By its design, PEC will support the role of community participation in participating schools. This is a relatively new concept in Mexico. This represents a major change in school governance and may lead to a greater focus of improving quality, particularly with the growing transparency on learning outcomes in Mexico. As discussed, PEC is likely to lead to an increase in graduation.

22. PEC also provides discretionary resources to schools. In Mexico, traditionally education can be driven by the center with the federal or state government directly providing teachers and other resources. PEC provides necessary resources for the school to allocate to its need. The analysis shows that while PEC is a reasonably equitable program, it will become more equitable in the second phase of the Program.

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Annex 10: Safeguard Policy Issues MEXICO: School Based Management Project

1. Environmental Safeguards

1 . The Program is not expected to have any negative environmental impact. The first phase of PEC received an environmental rating of C. Phase I1 maintains the same rating. The Program only supports minor civil works at participating schools (construction of sanitary facilities, minor repairs, and maintenance). The grants are small and insufficient to finance the construction of new buildings or major additions to existing structures. In addition, the Rules of Operation have never permitted the construction of new infrastructure through PEC. The Rules of Operations will contain basic health and environmental guidelines for these minor works. As part of the preparation of Phase 11, the Government and the World Bank reviewed the use of school grants in Phase I and confirmed that all activities were consistent with Phase 1’s environmental rating.

2. PEC and Indigenous Peoples

2. The higher order development objective of the APL is to improve social participation and educational outcomes at the basic education level in Mexico. The APL would achieve this outcome by promoting parental involvement, which has a positive impact on educational achievement, and to provide incentives and support to enhance teachers’ and directors’ role in school management. Strengthened accountability mechanisms create space for parents to actively participate in the education system and, if successful, raise aspirations for greater educational attainment levels for their children. At the same time, PEC provides financing to support school- managed development plans, known as PETE. Due to the national coverage and social approach of PEC, the Indigenous Peoples Policy was triggered and an IPP33 was prepared for the duration of the APL.

3 . IPP prepared for the APL follows the guidelines of the operational policy, including a consultation process that was incorporated in the Plan and taken into account in the design of activities targeting indigenous population. A summary of main points of the IPP is presented below; the complete IPP was disclosed in the PEC’s ~ e b s i t e ~ ~ on January 26, 2010 and at the Bank’s Infoshop on January 25,2010.

4. Legal framework. The National Constitution of Mexico (Constitucidn Nacional de 10s Estados Unidos Mexicanos) defines Mexico as a multicultural country where the rights of indigenous peoples are fully acknowledged. In regard to education, it establishes indigenous peoples’ right to receive education in their own language and in Spanish and taking into account their cultural background. By signing ILO (International Labour Organization) Convention 169, Mexico is committed to: (a) promote means to guarantee indigenous peoples equal opportunities in the access education; and (b) provide education opportunities consistent with their own needs and values. The creation of institutions such as the National Commission for the Development of Indigenous Peoples (CDI), the National Institute of Linguistics and the bilingual education

33 The first phase was prepared under OP 4.20 34 http:/lbasica.sep.gob.mx/pec/pdf/planindigenaabril2OIO.pdf

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system and other programs promoted by SEP aim at facilitating indigenous peoples’ access to education as established in this legal framework.

5 . Indigenous population. According to a recent estimate by the National Institute of Statistics, Geography and Informatics ( INEGI)~~ there are 8.7 million of indigenous peoples in Mexico of which 6.9 million live in communities where indigenous peoples represent at least 40 percent of the total population; the majority of this population lives in small, scattered rural communities. The states with the highest number of indigenous population are: Chiapas (1.2 million, 27.9 percent of the population), Oaxaca (1.3 million, 37.1 percent of the population), Yucatan (772,000’42.3 percent of the state’s population), Veracruz (742,000, 10.4 percent of the population), Puebla (684,000, 12.7 percent of the population), Guerrero (442,000, 18.2 percent of the population), Hidalgo (427,000, 18.2 percent of the population), Mexico (325,000’2.3 percent of the population), San Luis Potosi (290,000, 12.0 percent of the population), Quintana Roo (1 59,000, 14.0 percent of the population) Michoacan (1 32,000, 3.3 percent of the population) and Campeche (122,305, 16.2 percent of the population). The bases to identify indigenous peoples are: self recognition and speaking an indigenous peoples’ language. However this might be insufficient since there are indigenous persons who for several reasons do not speak a native language. Moreover, according with recent migration trends, around 2.6 million indigenous peoples are currently living in metropolitan areas of big cities such as Mexico City (91 l,OOO), Merida (294.0001), Cancun (128,000), Oaxaca (105,000), Puebla (1 54,000), and Toluca (95,000).

6. Indigenous and Education. In Indigenous Municipalities (identified in a recent study by CDI-UNDP as those with 40 percent or more of indigenous population), around 30 percent of the persons 15 years or older do not know how to read or write; this is the equivalent of 1.3 million illiterate persons. Women fare worse than men in all municipalities. This number is three times more than the national average rate and ten more times than in Mexico City’s. These municipalities also rank higher in regards to problems with access and low capacity and quality of education (rezago educativo); 83 percent are rated as high or very high. Education infrastructure is poor, usually only one school room without education materials; one teacher for all student grades, etc. Dropout students are very high and only a few children complete basic education. Programs such as PEC intend to ameliorate this situation.

3. Indigenous Peoples Plan in Phase I

7. The Indigenous Peoples Plan prepared for the APL identifies the main issues affecting indigenous population’s access to basic education and incorporates their priorities and expectations according to the consultation process carried out during preparation. The IPP also comprises indicators for the various phases of the APL. IPP’s main outcomes during the first phase are summarized below.

8. At the time PEC was launched on 2001, only 27 indigenous centers36 out of 2,240 schools, benefited from the Program. The goal of the IPP was to reach at least 4 percent of such centers in PEC. By 2007, the national coverage of PEC reached 37,897 basic education schools meanwhile indigenous centers grew to 2,324 or 6.1 percent. In 2008, although national coverage diminished to 37,246 schools, due to budget restrictions, indigenous centers reached 2,601, equivalent to 7.0 percent, well over the initial goal.

35 Instituto Nacional de Geografia Estadistica e Informhtica: Conteo por Vivienda 2005 36 Schools with 70 percent or more of indigenous students.

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9. In 2006 PEC Operational Rules, which regulate annual budget allocations and grant processing, specifically identified indigenous population as Program’s beneficiaries, emphasizing their importance as a target group. In 2008 Operational Rules expanded to target other vulnerable groups: temporary workers in camps, multiple grades schools (multigrado) and Community Schools under CONAFE. Indigenous population, whom are usually part of those groups, would also benefit from this addition.

10. Moreover, PEC has been promoting coordination with other federal programs also targeting indigenous population, namely the following:

(a) CONAFE, which operates community centers with indigenous children; (b) Oportunidades, who grant scholarships to indigenous students; and (c) Habitat, that operates in marginal and poor urban areas where indigenous migrants

regularly live.

11. Phase I1 of the APL would support the expansion of Program coverage, targeting disadvantaged schools in low-income urban areas, as well as to reorient a significant portion of the school grant to improve those schools’ internal efficiency and learning outcomes; participation of this type of schools is expected to increase by 30 percent. Phase I1 would also support new programs designed to identify, propose, and develop adjustments to adapt the Program for further expansion to schools serving other types of disadvantaged communities in semi-urban and non-urban areas. Phase I1 would also target indigenous peoples, therefore the IPP would be up-dated to incorporate lessons learned from the first phase and to adjust to the second phase triggers and goals.

12. In the school cycle 2006-2007 PEC transferred resources to benefit schools in 50 municipalities with the lowest HDI (identified in a study by the United Nations Development Programme, UNDP) located in states with high levels of indigenous population: Chiapas, Durango, Guerrero, Nayarit, Oaxaca, Puebla and Veracruz. The goal was to benefit 3,000 schools in those municipalities; by 2007-2008 PEC reached 2,757 of those schools. In 2007, PEC made and special transfer of resources (27.07 million pesos) to three states identified in the IPP as the ones having the worst education conditions (rezago educutivo): Chiapas, Guerrero and Oaxaca, states that also have the greatest percentage of indigenous population.

13. Under the second phase the IPP would consolidate and/or expand activities that have proved to benefit indigenous peoples and would address identified flaws. Some of the activities to be improved or added in the IPP during the second phase are summarized below.

4. Indigenous Peoples Plan in Phase I1

14. A review of the current IPP indicates that its diagnosis and proposals are still valid. Some of the activities planned to ensure that indigenous peoples benefit from the Project would be improved taking into account lessons learned during execution of Phase I. Consultation results and recommendations from a recent evaluation37 conducted in indigenous centers and including indigenous students, their parents, school principals and teachers, would be also taken into consideration.

37 Consult and Evaluation in Indigenous Schools by Maria del Carmen Escandon. 75

15. In Phase 11, PEC intends to develop new targeting and prioritization mechanisms, enhance social participation in school decision making, and incorporate incentives and capacity building to promote cultural changes to achieve its goals. The PETEs, which are submitted to state officials to request resources and the School Council of Social Participation, (comprising school directors, teachers, parents, and community members) that should be establish to prepare the PETE, would continue to be the main participation instruments of PEC. Both instruments would be also used to ensure that PEC schools achieve their objectives. In addition, the IPP would promote synergies to achieve concrete goals joining efforts with different federal programs operating at the basic education level. In accordance with these aims the IPP would incorporate the activities described next.

(a) Promotion. PEC is a demand-driven operation in which schools voluntarily apply to participate. To ensure that indigenous communities are aware of the Program and its advantages a promotion strategy would be designed to reach indigenous communities and promote their participation. This strategy would include: (i) agreements with the states coordinators to ensure that state programs (convocatorias) specifically target indigenous population; (ii) incentives for state promoters reaching and supporting indigenous communities fulfilling eligibility criteria; and (iii) a public awareness campaign among parents in indigenous communities about the importance of education and its returns. Moreover, PEC intends to strengthen PEC national management information system, including information disaggregated by gender and ethnicity to better monitor indigenous peoples participation and girls’ and boys’ achievements.

(b) Targeting. In the second phase PEC would give a greater focus on schools in poorer and more marginalized communities and would increase transparency of the state-designed school selection criteria. This focus includes indigenous peoples and other disadvantages groups in which indigenous are usually integrated such as: (i) urban migrants in poor urban areas; (ii) temporary workers in camps; and (iii) students in multi-grade schools. Phase I1 would also promote reforms to incorporate these groups in the Program Operating Rules (Reglas de Operacidn) that are published annually. It would also support new models that are targeted towards poorer and smaller schools.

(c) Participation. Participation in PEC has two key participation instruments: the PETEs (and their associated PATS prepared on an annual basis) and the School Council of Social Participation which are in charge of PETE preparation and submission to the State Coordination to request a grant. Experience of Phase I indicates that in some cases, indigenous centers either lack the capacity to prepare or do no actively participate in PETE preparation. The IPP in Phase I1 would design special training modules for parents and other stakeholders in indigenous communities. This training is also important to ensure transparency in school management because parents are custodians of the funds and must verify the purchases and contracts made with PEC resources.

(d) State engagement. At state level, the Program is carried out by the AEEs. The state education authorities are in charge of Program dissemination, reception of applications submitted by interested schools, provision of technical assistance to schools for preparation of PETEs, qualification of school proposals, and selection of schools. Therefore their engagement in application of the IPP is critical to achieve its goals. Some states with a high number of indigenous population, such as Guerrero and Michoacan, are

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already providing additional resources to specifically benefit indigenous peoples. To extend this approach to all states it is necessary to give some incentives. A special focus would be given to the 12 states that concentrate around 80 percent of indigenous population in Mexico. The Government and the World Bank are working to adjust the targeting of resources both at the federal (allocating more resources to poorer states) and at the state level (ensuring that more disadvantaged schools are more likely to participate, in particular indigenous centers. States would be encouraged to incorporate in their own operational rules covenants to target and facilitate schools from indigenous communities.

(e) Partnerships. PEC has been carrying out coordinating efforts with other federal programs also targeting poor, marginalized population, including indigenous peoples. The IPP would promote concrete arrangements to join efforts to benefit indigenous population at least with the following programs: Oportunidades, CONAFE, the Education Program for Groups in Vulnerability Conditions, and Habitat. Following Phase I1 strategy, the IPP would identify opportunities for partnerships with civil society organizations and private sector organizations willing to support indigenous peoples’ development. It would promote schools association to join efforts and cooperate closely with education authorities to better achieve schools’ education goals.

( f ) Monitoring and Evaluation. Phase I1 intends to improve PEC’s M&E System including the evaluation of its impact on student learning, The system would incorporate a specific segment dedicated to assess gains of students in indigenous centers to compare its achievements with regular schools, assess progress in reducing gaps and inform authorities to timely address biases and flaws.

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Indigenous Peoples Plan

Objectives

1. Identify the universe of public basic education indigenous schools, including actual and potential PEC schools, and incorporate the appropriate identification criteria in the Program Operating Rules

2. Include indigenous schools in the priority criteria for the selection of PEC schools

3. Achieve higher participation by indigenous schools in the Program

4. Improve coordination with specialized indigenous peoples agencies, namely: the CDI, with the Coordinacidn General para la Educacidn Intercultural Bilingue (General Coordination for Intercultural and Bilingual Education [GCIBE] at SEP), and with the Direccidn General de Educacidn Indigena (General Directorate for Indigenous Education [DGEI] at SEP) in order to:

- Support Program promotion among indigenous peoples;

- Provide vigilance regarding the Mexican constitutional mandate with respect to indigenous peoples education; and

- Carry out studies on the cultural and educational characteristics of indigenous peoples living in urban areas. 5 . Strengthen the initiatives to improve the quality of education in the most disadvantaged urban areas.

Responsible Agency

SEP

SEP

SEP

SEP

SEP, DGEI, General

Coordination for

Intercultural and Bilingual

Education (CGEIB) and

CDI

Specific Activities

Assist states in identifying indigenous public basic education schools using additional criteria to complement the standard designation of “indigenous schools” currently utilized by SEP, and apply the results to update PEC databases. Modify Program Operating Rules to give priority to the selection of schools located in areas of medium, high and very high marginality index and to indigenous schools. Take measures to promote an increase in the share of indigenous schools participating in the Program each year, while maintaining a minimum participation rate of 4 percent. Specialized agencies will be asked to collaborate to:

-Increase the impact of the Program on indigenous students.

- Help promote PEC in indigenous communities with support from CDI.

- Help prepare PEC promotion materials in indigenous languages.

- Promote the development of research on indigenous peoples in urban areas and their education needs; and the carrying out of ethnographic studies of indigenous peoples in urban areas aimed to strengthen this aspect of PEC.

A Coordination Forum will be established to strengthen initiatives directed to improve the quality of indigenous education in urban areas. Joint strategies should be favored to carry out the recommendations thereof.

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Annex 11: Project Preparation and Supervision MEXICO: School Based Management Project

Planned Actual PCN review May 2009 May 2009 Initial PID to PIC Initial ISDS to PIC Appraisal October 2009 February 20 10 Negotiations November 2009 April 20 10 BoardIRVP approval December 2009 June 20 10 Planned date of effectiveness JanuaryfFebruary 2009 July 20 10 Planned date of mid-term review Planned closing date

February 20 12 June 20 13

February 20 12

Key institutions responsible for preparation of the Project: Secretariat of Public Education Secretariat of Finance and Public Credit National Financing Agency (NAFIN)

Bank staff and consultants who worked on the Project included: Name Title Unit Ricardo Silveira Co-Task Team Leader LCSHE Erik Bloom Co-Task Team Leader LCSHE Juan Carlos Serrano Financial Management Specialist LCSFM Peter Holland Education Specialist LCSHE Tomas Sodas Senior Procurement Specialist LCSPT Gabriel Penaloza Procurement Officer LCSPT Mariangeles Sabella Sr. Counsel LEGLA Maria Elena Castro-Munoz Senior Social Scientist LCSSO Maria E. Colchao Sr. Program Assistant LCSHD Isy Faingold Education Specialist Consultant Xiomara Morel Sr. Financial Management Specialist LCSFM Jose C. Janeiro Sr. Finance Officer CTRFC Dolores Lopez-Larroy Lead Financial Officer BDM Maria del Carmen Escand6n Inclusion Specialist Consultant Josk de Jesus L6pez Information Systems Specialist Consultant Ruben Fernandez Economist Consultant Mary A. Dowling Language Program Assistant LCSHE Peer Reviewers: Harry Patrinos (Lead Education Economist, HDNED), Venkatesh Sundararaman (Senior Economist, SASHD), Mae Chu Chang (Lead Education Specialist, EASHD)

Bank funds expended to date on Project preparation: 1. Bank resources: $205,000 2. Trust funds: 0 3. Total: $205,000

Estimated Approval and Supervision costs: (a) Remaining costs to approval: $10,000 (b) Estimated annual supervision cost: $90,000

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Annex 12: Documents in the Project File MEXICO: School Based Management Project

A. BANK STAFF DOCUMENTS

Garcia, V., F. h a u l and H.A. Patrinos. 2005. “Returns to Education and Quality of Education in Mexico.’’ World Bank (Processed).

Gertler, P., H.A. Patrinos and M. Rubio-Codina. 2006. “Empowering Parents to Improve Education: Evidence from Rural Mexico.” World Bank Policy Research Working Paper 3935.

Jimenez, E. and Y. Sawada. 2003. “Does community management help keep kids in schools? Evidence using panel data from El Salvador’s EDUCO program.” CIRJE Discussion Paper.

Jimenez, E. and Y. Sawada. 1999. “DO Community-managed Schools Work? An Evaluation of El Salvador’s EDUCO Program.” World Bank Economic Review. 13(3): 415-41.

Patrinos, H.A. and S. Metzger. 2004. “Returns to Education in Mexico: An Update.” World BaWniversidad de las AmCricas, Mexico (Processed).

Patrinos, H.A. 2006. “Mexico: AGES (Apoyo a la Gestibn Escolar) - School Management Support: A Qualitative Assessment.” World Bank. Processed.

Patrinos, H.A. 2009. “Empowering Parents to Improve Education” . World Bank (Draft).

Shapiro, J. and J. Moreno-Trevino. 2004. Compensatory Education for Disadvantaged Mexican Students: An Impact Evaluation Using Propensity Score Matching. World Bank Policy Research Working Paper 3334.

World Bank. 2005. Determinants of Learning Policy Note (Report No. 31842-MX). Latin America and the Caribbean, Human Development. The World Bank, Washington, D.C.

World Bank. 2008a. What is School-Based Management. Washington DC: World Bank.

World Bank. 2008b. What do We Know about School-Based Management. Washington DC: World Bank.

B. OTHER

Angrist,J., E.Bettinger, E.Bloom, E.Kin, and M.Kremer. 2002. “Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment.” American Economic Review 92(5): 1535-1558.

Armor, D., P. Conry-Osequera, M. Cox, N. King, L. McDonnell, A. Pascal, E. Pauly and G. Zellman. 1976. “Analysis of the School Preferred Reading Program in Selected Los

80

Angeles Minority Schools.” Rand Corporation Report No.R-2007-LAUSD, Santa Monica, CA.

Avila and Nora. 2005. "Evaluation Social y Analisis de actores involucrados del programa Escuelas de Calidad”.

Barro, R.J. 2001. “Human Capital and Growth.” American Economic Review, Papers and Proceedings 9 l(2): 12-1 7.

Cabrero, E., C. Santizo, and C. Najera, 2003. “Rendicion de Cuentas y Transparencia en el programa Mexican0 “Escuelas de Calidad”.

Card, D. and A. Krueger. 1992. “Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States.” Journal of Political Economy loo( 1): 1-40.

Consejo Nacional de Poblacion. hdice de marginacion urbana, 2000. http://www.conapo.gob.mx/. Diciembre 2002.

Diario Oficial de la Federacion. 4 de enero de 2005. Ley General de Educacidn.

Duflo, E. and E.Saez. 2003. “The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment.” Quarterly Journal of Economics 1 18(3): 8 15-842.

Hanushek, E.A. and D.D. Kimko. 2000. “Schooling, Labor Force Quality, and the Growth of Nations. ” American Economic Review 90(5): 11 84-1208.

IN1 2002. Indicadores socioecondmicos de 10s pueblos indigenas de Mkxico, edited by E. Serrano Carreto, A. Embriz Osorio and P. Fernandez Ham. Mexico, INI, UNDP and CONAPO.

Latapi, P. and and Ulloa Herrero. 2000. El Financiamiento de la Educacidn Basica en el Marco del Federalismo. Fondo de Cultura Econbmica.

Lopez-Calva, L. F. and L. D. Espinosa. 2006. “Efectos diferenciales de 10s programas compensatorios del CONAFE en el aprovechamiento escolar,” in Efectos del Impulso a la Participacidn de 10s Padres de Familia en la Escuela, CONAFE, Mexico.

Mancera Corcuera, and Vega Garcia. 2000. “Oportunidades y Retos del Federalismo Educativo: El Camino Recorrido 1992-2000.” En Memoria del Quehacer Educativo 1995-2000. Tom0 I. SEP.

Merino Juarez. 1999. “Federalism and the Policy Process: Using Basic Education as a Test-Case of Decentralization in Mexico.” PhD Thesis. Harvard University.

Murnane, R.J. 1975. Impact of School Resources on the Learning of Inner City Children. Cambridge, MA: Ballinger.

81

Murnane, R. J., J. B. Willet, and S. Cardenas. 2006. “Did Participation of Schools in Programa Escuelas de Calidad (PEC) Influence Student Outcomes?” Working Paper, Harvard University Graduate School of Education, Cambridge, MA.

OECD. 2004a. “Top-performer Finland Improves Further in PISA Survey as Gap between Countries Widens.” Paris: OECD.

OECD. 2004b. Education at a Glance. Paris: OECD.

OECD. Programme for International Student Assessment, 2003. http://www.pisa.oecd.ora/

Presidencia de la Republica. 2005. Quinto Informe de Gobierno, Anexo Estadistico. Ramirez, A. 2005. “Mexico,” in G. Hall and H.A. Patrinos, eds. Indigenous Peoples, Poverty and

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Rockoff, J.E. 2004. “The Impact of Individual Teachers on Student Achievement: Evidence from Panel Data.” American Economic Review 94(2): 247-252.

Secretaria de Educacion Publica. 200 1. “Programa Nacional de Educacion 2002-2006”.

Secretaria de Educacion Publica. 2003. “El Estado Inicial de las Escuelas Primarias del Programa Escuelas de Calidad” Informe Ejecutivo sobre 10s indicadores de linea base.

Secretaria de Educacion Publica. 2003. El Sistema Educativo de 10s Estados Unidos Mexicanos, Principales CiJFas, Ciclo escolar 2002-2003.

Secretaria de Educacion Publica 2005. “Reglas de Operaci6n” publicada en el Diario Oficial de la Federation, Junio 13,2005

Secretaria de Educacion Publica 2005. “Sistema de Financiamiento a las Escuelas del Programa Escuelas de Calidad”, Fondo Nacional para Escuelas de Calidad

Secretaria de Educacion Publica 2005, “Preparativos para contratach de Prkstamo con el Banco Mundial.

Secretaria de Hacienda y CrCdito Publico. 2005. Cuenta de la Hacienda Ptiblica Federal 2004.

Shapiro,J., and E.Skoufias. 2005. “The Pitfalls of Evaluating a School Grants Program Using Nonexperimental Data.” Mimeo, World Bank.

Zamudio, A. 2001. “Educacion y la distribucion condicional del ingreso: una aplicacion de regresidn cuantil.” El Trimestre Economico 68(269): 39-70.

Zapote, E. 2005. “Plan de Desarrollo Indigena”.

82

Annex 13: Statement of Loans and Credits MEXICO: School Based Management Project

Difference between Exaected and Actual

Original Amount in US% Millions

Project ID FY Project Name

Disbursements' ' IBRD IDA Grants Cancel. Undisb. Orig. Frm Rev'd

c

' c

PI01369 2010 PI16965 2010 PI16226 2010 PI12262 ' 2010 PI07159 2010 PI14271 2009 PI06589 2009 PI12258 2009 PI06528 2009 PI 15067 2009 PI06261 2009 PO88996 e 2008 PO85593 2006 PO87038 2006 PO74755 e 2005 PO89865 2005 PO87152 ' 2004 PO70108 e 2003

r

c

c

c

r

r

r

' c

c

MX Compensatory Education MX Influenza Prevention and Control MX Social Protection in Health MX Upper Secondary Education DPL MX Urban Transport Transformation Progr MX Customs Institutional Strengthening MX IT Industry Development Project MX Priv Housing Finance Markets Strngth MX Results-based Mgmt. and Bugdeting MX Support to Oportunidades Project MX Sustainable Rural Development MX (CRL2) Integrated Energy Services MX (APL r) Tertiary Educ Student Ass MX Environmental Services Project MX State Judicial Modernization Project MX-(APLI) Innov. for Competitiveness MX (CRL1)Savings & Rurl Finance(BANSEF1) MX Savings & Credit Sector Strengthening

Overall Results

100.00 0.00 491.00 0.00 1250.00 0.00 700.00 0.00 150.00 0.00 10.03 0.00 80.00 0.00

1010.00 0.00 17.24 0.00

1503.76 0.00 50.00 0.00 15.00 0.00 180.00 0.00 45.00 0.00 30.00 0.00

250.00 0.00 154.50 0.00 85.60 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 16.5 0.00 0.38 0.00

100.00 0.00 491.00 0.00 1250.00 0.00 700.00 0.00 150.00 0.00 10.00 0.58 80.00 34.35 7.48 0.83 17.24 9.04 1.23 -1502.53

49.88 0.00 14.96 8.63 60.35 58.44 10.23 7.31 13.50 30.00 31.94 29.00 33.50 45.12 12.46 -8.54

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 30.71 6.79

6,122.13 0.00 0.00 16.88 3,033.76 -1378.01 37.51

83

MEXICO STATEMENT OF IFC?s

Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed

IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. I998

2006 1995 1999 1998 2005 2006

200 1 2004 2002 1999 2005 2004 200 1 2000 2005 1998 2001 1996 2000 2005 I998 2004 1989 1996 1999 1998 2005

2006

2000

2005 2003 1998 2003 1995

Ayvi BBVA-Bancomer Banco del Bajio Baring MexFnd Baring MexFnd CIMA Puebla CMPDH Carlyle Mexico Chiapas-Propalma Compartamos Compartamos Coppel Corsa Credit0 y Casa DTM Ecomex Educacion FMEM Forja Monterrey GFNorte GIBSA GIRSA GMAC Financiera Grupo Calidra Grupo Calidra Grupo FEMSA Grupo Posadas Grupo Posadas Grupo Sanfandila Grupo Sanfandila Grupo Su Casita Grupo Su Casita lnfologix BVI lnnopack lnteroyal La Bene Lomas de Real Merida I11 Mexmal Mexplus Puertos

2.14 6.63 0.00 0.00 0.00 3.25 14.50 0.00 0.00 0.00 15.58 25.71 2.79 21.25 17.04 4.00 3.54 15.12 3.71 95.63 5.41 22.50 120.67 4.00 20.89 0.00 1.60 0.00 4.09 0.00 0.00 0.00 3.50 0.00 0.00 5.00 47.46 24.86 0.00 0.00

0.00 0.00

45.00 0.29 1.41 0.00 0.00

20.00 0.97 0.66 0.00 0.00 3.00 0.00 0.00 0.00 0.00 0.67 3.00 0.00 0.00 0.00 0.00 6.00 0.00 0.02 0.71 0.00 0.00 0.00 7.08 7.68 0.00

12.81 0.01 0.00 0.00 0.00 0.00 0.55

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 0.24 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

20.00 0.00 0.80 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 3.71 0.00

18.19 30.00 0.00 0.00 0.00 0.00 0.00 0.00 1.33 6.49 0.00 0.00 0.00 0.00 0.00 0.00

95.22 52.30 0.00 0.00

2.14 6.63 0.00 0.00 0.00 3.25

14.50 0.00 0.00 0.00

15.58 25.71 2.79 0.00

17.04 2.00 3.54 4.86 3.71

45.63 5.41

22.50 32.52 4.00

20.15 0.00 0.00 0.00 4.09 0.00 0.00 0.00 3.50 0.00 0.00 0.00

46.18 24.86 0.00 0.00

0.00 0.00 0.00 0.29 1.41 0.00 0.00 8.44 0.97 0.66 0.00 0.00 3.00 0.00

0.00 0.00 0.00 0.67 3.00 0.00 0.00 0.00 0.00 6.00 0.00 0.02 0.71 0.00 0.00 0.00 7.08 7.68 0.00

12.81 0.01 0.00 0.00 0.00 0.00 0.55

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 0.24 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

10.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

20.00 0.00 0.80 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 3.71 0.00

18.19 30.00

0.00 0.00 0.00 0.00 0.00 0.00 1.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00

95.22 52.30 0.00 0.00

1999 2003

2003 2000 2002 2000 2004 2000 2000 2004 2005 2006 I997 2005 2003 2006

1998

Mexplus Puertos Occidental Mex Occihol POLOMEX S.A. Pan American Puertas Finas Rio Bravo SSA Mexico Saltillo S.A. Servicios Su Casita Su Casita Su Casita TMA UNITEC Valle Hermoso Vuela ZN Mexico I1 ZN Mxc Eqty Fund

0.00 24.90 0.00 4.94 0.00 8.94 44.10 44.50 31.16 5.92 16.49 50.68 7 I .48 1.06 30.24 50.68 40.00 0.00 0.00

0.25 0.00 9.99 0.00 0.92 0.00 0.00 0.00 0.00 0.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.07 I .69

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 3.29 0.00

20.00 0.00 0.00 0.00

0.00 33.20

0.00 0.00 0.00 0.00

48.26 0.00

34.89 5.07 0.00 0.00 0.00 3.68 0.00

103.49 0.00 0.00 0.00

0.00 24.90

0.00 4.94 0.00 8.94

44. I O 44.50 31.16

5.92 16.49 50.68 0.00 1.06 0.00

50.10 0.00 0.00 0.00

0.25 0.00 9.99 0.00 0.92 0.00 0.00 0.00 0.00 0.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.51 1.69

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 3.29 0.00

20.00 0.00 0.00 0.00

0.00 33.20 0.00 0.00 0.00 0.00

48.26 0.00

34.89 5.07 0.00 0.00 0.00 3 68 0.00

103.49 0.00 0.00 0.00

Total portfolio: 915.96 130.43 54.33 435.83 593.38 72.31 54.33 429.34

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2006 2001 2003 2005 2000 2006 200 I 2006 2006 2005 2006 2005 1998 2007 2006 2006 2006

Bajio Ecomex Mexmal Coppel I I Educacion Metro-WHL GFNorte-CL BANSEFI AFORE Protego Sofol Credit0 y Casa Mexico MBS CEF Pan American 2 Cima Hermosillo Nexxus 111 Fund Compartamos Ill Irapuato-Piedad Su Casita WHL I1

0.08 0.00 0.00 0.01 0.00 0.05 0.00 0.00 0.00 0.02 0.03 0.00 0.00 0.00 0.05 0.01 0.17

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 0.02 0.00 0.00 0.00

0.00 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00

0.00 0.00 0.00

0.00 0.00 0.00

0.10

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total pending commitment: 0.42 0.02 0.03 0.10

85

Annex 14: Country at a Glance MEXICO: School Based Management Project

V v

Mexico a t a glance win

Key Development Indicators

72008)

Population mid-year (millions) Surface area (thousand sq km) Population growth (Yo) Urban population (%of tot ai population)

GNI (Atlas method US$ billions) GNIpercapita(At1as method US$) GNI per capita (PPP international 5 )

GDP growth(%) GDP per capita growth (YO)

(most recent estimate, 2003-2008)

Povertyheadcount ratio at bl25aday(PPP O h )

Povertyheadcount ratio at $ZOOaday(PPP %) Lifeexpectancy at birth (years) Infant mortality (per 1OOOlive births) Child malnutntion(%ofchildren under 5)

Adult literacy male (%of ages 15 and older) Adult literacy female (%of ages 15 and older) Gross pnmaryenrollment male(%of agegroup) Gross pnmary enrollment female (%of age group)

Access to animprovedwatersource(%of population) Access to improved sanitation facilities (%of population)

M eaco

1364 1964

10 77

1062 1 9,990 n g n

13 0 3

<2 5

75 29

3

94 91 1% ni

95 81

Net Aid Flows 1980 I990

Latin Upper Amenca middle &Canb income Age distribution, 2007 . Female

561 824 20421 41497

12 0 7 78 75

3,252 5654 5,801 7.a7 9,678 72,072

5 7 5 6 4 4 5 0

6 4 2 0 2 4 8 pert-1 01 Lotai p~pliation I

8 I?

73 71 22 21 4

92 95 90 93 720 m 16 n 9

91 95 78 83

Under4mortelltyrate(per 1,000) 7 50

40

30

20

10

0 I 1990 1995 2000 2007

I DMexico OLabn Arnsnca & !ha Caribbean

I 2000 2008 8

(US$ millions) Net ODA and official aid TopJdonors (in2007):

United States Germany France

Aid (%of GNI) Aid percapita (US$)

Long-Term Economlc Trends

Consumer prices (annual %change) GDP implicit deflator (annual %change)

Exchange rate (annual average, local per US$) Terms of tradeindex(2000= DO)

P 0 pulation mid-year (millto ns) GDP (US$ millions)

Agnculture Industry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation

Exports of goods and sewices Imports of goods andservices Gross savings

M anufactunng

55 156

9 23

15 51

0.0 0.1 1 2

n 9

263 267 334 281

0 0 2 8 8 4 0 6

676 832 194,851 262.7'1)

-56 721

24 84 n 28 -11 6

0.0 0.0 1 1

9 5 5 1 P I 6 6

95 11 1 no 1%

980 1364 581428 2088 P8

9 0 33 6 22 3 57 4

65 1

27 2

a 7 no

22 0

no

(%of GDPJ 7 8 4 2

28 4 28 0 20 8 20 3 63 7 67 8

69 6 67 0 8 4 Ill

23 1 23 9

8 6 30 9 8 7 32 9

20 3 20 5

38 37 1 6 8 59 1

65 5

26 4

28 3 30 5 24 9

0 3

I I Growth of GDP and GDP per capita ( O b )

8 8 4 2 0 2 4 a a

. l o 95

1380-90 1990-2000 2000-08 (average annualgrowth W

2 1 16 10 11 3 1 2 7

0 8 15 2 1 21 3 8 19 15 4 3 18 14 2 9 3 1

14 2 3 3 8 2 4 18 0 4

-3 3 4 7 15

7 0 ?46 5 7 10 723 6 3

Note Figures initalics areforyears otherthanthose specified 2008dataare preliminary % Aiddataarefor2007

Development Economics, Development Data Group (DECDG)

indicates dataare not available

86

F

Mexico

Balance o f Payments and Trade

(US$ millions) Total merchandiseemorts (fob) Total merchandise imports (cif) Net trade in goods and services

Current account balance asa%of GDP

Workers' remittances and compensation of employees (receipts)

Reserves, including gold

Central Government Finance

(%of GDP) Current revenue (including grants)

Current expenditure

Overall surplusldeficit

Highest marginal taxrate (%)

Taxrevenue

Individual Corporate

External Debt and Resource Flows

(US$ millions) Total debt outstanding and disbursed Total debt service Debt relief (HIPC MDRI)

Total debt (%of GDP) Totaldebt service (%of exports)

Foreign direct investment (net inflows) Portfolio equity(net inf low)

2000 2008

166,Pl 291,343 774.450 308,603 -13,661 -24,340

-18.684 -15,806 -32 -15

6,573 25.W

35,577 95.298

214 237 ?I6 8 2 214 8 8

-34 -2 1

40 28 35 28

150,901 203,984 58,509 41332 -

260 187 304 P I

18,466 18,978 447 -3,503

Composition oftotal external debt, 2008

U S mi l l i o~

Private Sector Development

Time required to start a business (days) Cost to start a business (%of GNIpercapita) Time required to register property (days)

Rankedas amajorconstraint to business (%of managers surveyedwho agreed) ' Anticompetitlve orinformal practices

F Corruption

Stock market capitalization (%of GDP) Bank capital to asset ratio ( O h )

2000 2010

- U - 117 - 74

2000 2007

8 0 778

215 388 9 6 M 4

I Governance indicators, 2000 and 2008

Vace and accwrdabilily

Political slaklity

Regulatwy quafity

Ruleof lim

control Of corr"@lo"

I 0 25 50 75 100

0 2 0 0 8 Cwntry's percentile rank (01W 02000 highervaiuro rrnm bdler m616

Source K ~ ~ l m i n n X ~ ~ y h l w f m m Wood Bank

Technology and Infrastructure

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

High technologye~or ts subscnbers (per 130 people)

(%of manufactured euports)

Environment

Agncultural land (%of land area) Forest area (%of land area) Nationally protected areas (%of land area)

Freshwater resources per capita (cu meters) Freshwaterwthdrawal (billion cubic meters)

C02emissions percapita (mt)

GDP per unit of energy use (2005PPP $ perkgofoilequivalent)

Energy use percaprta (kg of oil equivalent)

Werld Bank Group pOrtfOli0

(US$ millions)

IBRD Total debt outstanding anddisbursed Disbursements Principal repayments Interest payments

IDA Total debt outstanding and disbursed Disbursements Total debt service

IFC (fiscalpar) Total disbursed and outstanding portfolio

Disbursementsfor IFC ownaccount Portfolio sales prepayments and

repaymentsforIFC omaccount

of which IFC o m account

M IGA Gross exposure New guarantees

2000 2007

320 500

27 82

224 7 1

55 55 337 330

53

4090 3885 70 2

3 9 4 1

7 9 7 7

1533 1702

ZOO0 ZOO9

n444 13142 1748 4882 1330 654 892 204

- - - - -

2000 2007

1234 184 723 798 ns 209

66 U4

- - - -

Note Figures in italics are for years otherthan those specified 2008dataare preliminary Y25/13 indicates data are not available -indicates observation is not applicable

Development Economics, Development Data Group (DECDG)

87

Millennium Development Goals

Measles immunlrrtlon ( O h of 1-year olds)

V

Mexico

ICT Indicators (per 100 people)

With selected targets to achieve b e w e n 1990 and 2015 (estimateclosest to dafe shown 4-2pars)

Goal 1: halve the rates for extreme poverty and malnutrltion 1990 7 7

3 2 0 9

Poverty headcount ratio at 5 125 a day (P P PI %of population) Poverty headcount ratio at national poverty line (%of population) Shareof incomeorconsumption to thepoorest qunitile(%) Prevalence of malnutrition (%of children under 5 )

Goal 2: ensure that children are able to complete primary schooling Primaryschool enrollment (net %) 98 Primary completion rate (%of relevant age group) 66 Secondary school enrollment (gross OA) 55 Youth literacyrate (%of people ages 15-24) 95

Goal 3: elimlnate gender dlsparlty In educstlon and empower women Ratio of glrk lo boys in primaryand secondaryeducalion (%) Women employed in the nonagricultural sector (%of nonagricultural employment) Proportion of seats held bywomen in national pafliament (%)

97 37 Tz

Goal 4: reduce under4 mortality by two-thirds Under-5 mortalityrate (per 1000) 52 Infant morlalityrate (per I000 live births) 42 Measles immunization(proportionof one-yearolds immunized,%) 75

Goal 6: reduce maternal mortallty by three-fourths Maternal mortality ratio (modeled estimate, per TI0,OOO live births) Births attended by skilled healthstaff (%oftotal) Contraceptive prevalence (%of women ages 15-49)

Goal 6: halt and begin to reverse the spread o f H l V l A l D S and other major diseases Prevalenceof HIV (%of populationages 15-49) 0 2

61 Incidence of tuberculosis (per TI0 000 people) Tuberculosis cases detected under DOTS (%)

Goal 7: halve the proportion of people without sustalnable access to basic needs Access to animpmvedwatersource(%of population) 88

Forest area(%of totallandarea) 35 5 Nationally protected areas (%oftotalland area) C02 emissions (metnc tons per capita) GDP per unit of energy use (constant 2005 PPP 5 per kg of oil equivalent)

Access to improved sanitation facilities (%of population) 56

4 5 6 8

Goal 8: dcavelop a global partnershlp for development Telephone mainlines (per ?IO people) Mobilephonesubscribers (per UOpeople) Internet users (per UOpeople] Personal computers (per TI0 people)

6 4 0 1 0 0 0 8

I I Education Indicators (X)

2000 2002 2004 20062007

- C ~ n m a r y net enrollment mito

-Ratlo ofglris to boys I" pnrnary 8 secondary education

Iw odco

1996 7 0

4 3

96 58 96

36 14

45 36 90

86 67

0 3 44 a

90 66

34 6

4 0 6 9

2000 2007 4 8 Q

24 2 7 6 3 9 4 6 6 0 3 4

97 98 99 7l4 72 87 97 98

99 99 37 39 18 23

38 35 32 29 96 96

60 93

70 71

0 3 0 3 32 20 64 99

93 95 76 81

33 7 33 0 5 3

3 9 4 1 7 9 7 7

9 7 '126 188 0 8 144 63 2 0 1 5 2 22 7 2 6 5 8 144

100 90 60 70 60 50 40 30

25 20 10

0 0

75

50

2000 2002 2004 20062007

0Fcx.d + mobile subscnbsm nl"ter"el"9616

1990 1995 2000 2007

UMexlca OLalln AmenOa 8 the Canbbean

Note Figures in italics are for years otherthan those specified

Development Economics, Development Data Group (DECDG)

indicates dataarenot available Y25/0

88

Citlaltépetl (5,747 m) Citlaltépetl (5,747 m)

Si e r r a

Ma

dr e O

c c i d e n t a l

S ierra Madre del Sur

Si e

r r a M

ad

r e O

r i e nt a

l

CAMPECHECAMPECHE

CHIAPASCHIAPAS

TABASCOTABASCO

OAXACAOAXACA

GUERREROGUERRERO

COLIMACOLIMA

JALISCOJALISCO

NAYARITNAYARIT

ZACATECASZACATECAS

TAMAULIPASTAMAULIPAS

NUEVONUEVOLEONLEON

C O A H U I L AC O A H U I L A

C H I H U A H U AC H I H U A H U ASONORASONORA

D U R A N G OD U R A N G O

SAN LUISSAN LUISPOTOSIPOTOSI

MICHOACANMICHOACAN PUEBLAPUEBLA

VERACRUZVERACRUZ YUCATANYUCATAN

QUINTANAQUINTANAROOROO

S INA

LOA

S I NA

LOA

MazatlánMazatlán

TorreónTorreónMatamorosMatamoros

LaredoLaredo

OjinagaOjinaga

Los MochisLos Mochis

NavojoaNavojoa

NogalesNogalesSanSan

FelipeFelipe

LoretoLoreto

SonoitaSonoita

AguaAguaPrietaPrieta

GuaymasGuaymas

TehuantepecTehuantepec

FronteraFrontera

VillahermosaVillahermosa

TuxtlaTuxtlaGutierrezGutierrez

OaxacaOaxaca

ChilpancingoChilpancingo

ColimaColima

GuadalajaraGuadalajara

TepicTepic

DurangoDurango

SaltílloSaltíllo

ChihuahuaChihuahua

CuliacánCuliacán

HermosilloHermosillo

MexicaliMexicali

GuanajuatoGuanajuato

PachucaPachuca

AguascalientesAguascalientes

QuerétaroQuerétaro

MoreliaMoreliaTolucaToluca

CuernavacaCuernavaca PueblaPuebla

TlaxcalaTlaxcala

JalapaJalapa

San LuisSan LuisPotosíPotosí

CiudadCiudadVictóriaVictória

ZacatecasZacatecas

MonterreyMonterrey

MEXICOMEXICOCITYCITY

Yaqui

Rio Bravo

Fuerte

Salado

Lerma

Balsas

Conchos

BAJABAJACALIFORNIACALIFORNIA

BAJABAJACALIFORNIACALIFORNIA

SURSUR

MEXICOMEXICO

MORELOSMORELOS

DISTRITO FEDERALDISTRITO FEDERAL

HIDALGOHIDALGOGUANAJUATOGUANAJUATO

AGUASCALIENTESAGUASCALIENTES

TLAXCALATLAXCALA

QUERÉTAROQUERÉTARO

Usuummacinta Rio Grande

GUATEMALAGUATEMALATapachula

PuertoEscondido

Acapulco

Puerto Vallarta

Mazatlán

TorreónMatamoros

Laredo

Ojinaga

Los Mochis

Navojoa

Nogales

Ensanada

Tijuana

SanFelipe

SantaRosalia

Loreto

Cabo San Lucas

Sonoita

AguaPrieta

Ciudad Juárez

Guaymas

Veracruz

Tampico

Tehuantepec

Cozumel

Cancun

Frontera

Chetumal

Merida

Villahermosa

Campeche

TuxtlaGutierrez

Oaxaca

Chilpancingo

Colima

Guadalajara

Tepic

Durango

Saltíllo

Chihuahua

Culiacán

Hermosillo

Mexicali

La Paz

Guanajuato

Pachuca

Aguascalientes

Querétaro

MoreliaToluca

Cuernavaca Puebla

Tlaxcala

Jalapa

San LuisPotosí

CiudadVictória

Zacatecas

Monterrey

MEXICOCITY

CAMPECHE

CHIAPAS

TABASCO

OAXACA

GUERRERO

COLIMA

JALISCO

NAYARIT

ZACATECAS

TAMAULIPAS

NUEVOLEON

C O A H U I L A

C H I H U A H U A

BAJACALIFORNIA

BAJACALIFORNIA

SUR

SONORA

D U R A N G O

SAN LUISPOTOSI

MICHOACAN

MEXICO

MORELOS

DISTRITO FEDERAL

PUEBLA

HIDALGOVERACRUZ

GUANAJUATO

AGUASCALIENTES

TLAXCALA

YUCATAN

QUINTANAROO

S INA

LOA

QUERÉTARO

UNITED STATES OF AMERICA

GUATEMALA

BELIZE

HONDURAS

ELSALVADOR

Yaqui

Rio Grande

Rio Bravo

Fuerte

Salado

Lerma

Balsas

Usumacinta

Conchos

PACIFICOCEAN

Gulf of Mexico

Bay of Campeche

Gulf ofTehuantepec

Gulf of

Honduras

Gu

l f of C

al i f o

r ni a

To Los Angeles

To Gila Bend

To Albuquerque

To Alamogordo

To Midland

To San Antonio

To San Antonio

To Houston

To San Salvador

Si e r r a

Ma

dr e O

c c i d e n t a l

S ierra Madre del Sur

Si e

r r a M

ad

r e O

r i e nt a

l

Citlaltépetl (5,747 m)

115°W

30°N30°N

25°N

15°N

25°N

20°N

15°N

110°W

110°W

105°W 100°W 95°W 90°W

105°W 100°W 95°W

85°W

MEXICO

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

0 50 100 150 200 Miles

300 Kilometers IBRD 33447R

NO

VEM

BER 2008

MEXICOSELECTED CITIES AND TOWNS

STATE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

STATE BOUNDARIES

INTERNATIONAL BOUNDARIES