December 2014 PARAGUAY For the period 2015-2018 WORLD BANK GROUP Document of The WBG * FOR OFFICIAL USE ONLY* Report No. 82487-PY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT * INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF PARAGUAY FOR THE PERIOD FY15-FY18 November 7, 2014 * Argentina, Paraguay and Uruguay Country Management Unit * Latin America and the Caribbean Region *The International Finance Corporation * Latin America and the Caribbean Region *The Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official du- ties. Its contents may not otherwise be disclosed without WBG authorization. December 2014 PARAGUAY For the period 2015-2018 ka WORLD BANK GROUP AAA Analytical and Advisory Activities CAF Banco de Desarrollo deAmOrica Latna (Development Bank of Latin America) CBP Banco Central del Paraguay (Central Bank of Paraguay) CCT Conditional Cash Transfer CEDAW Committee on the Elimination of Discrimination against Women CEPEP Centro Paraguayo de Estudios de Poblaci6n (Health sector NGO) CPFL Consumer Protection and Financial Literacy CPS Country Partnership Strategy CPSCR CPS Completion Report CPSPR CPS Progress Report CSO Civil Society Organization DDO Draw Down Option DGEEC Direcci6n General de Estadistica, Encuestas y Censo (National Statistics Agency) DNCP Direcci6n Nacional de Compras POblicas (National Procurement Office) DP Development Partner DPO/DPL Development Policy Operation/Loan EIF Encuesta de Integraci6n Financiera (Survey on Financial Inclusion) ENDSSR Encuesta Nacional de Demografia y Salud Reproductiva (National Demographic and Reproductive Health Survey) EPH Encuesta Permanente de Hogares (National Household Survey) EU European Union FAO Food and Agriculture Organization FONACIDE Fondo Nacionalde Inversi6n POblica y Desarrollo (National Public Investment and Development Fund) FY Financial Year G Guaranies (Paraguayan Guaranies) GDP Gross Domestic Product GEF Global Environment Facility Global Findex Global Financial Inclusion Database GoP Government of Paraguay GPSA Global Partnership for Social Accountability IADB Inter-American Development Bank IBRD International Bank for Reconstruction and Development IFC International Finance Corporation IMF International Monetary Fund IPF Investment Project Financing IPS Instituto de Previsi6n Social (Social Security Institute) 1SC Impuesto Selectivo al Consumo (Selective Consumption Tax) 1SR Implementation Status and Results Report LAC Latin America and Caribbean Region MAG Ministerio deAgricultura y Ganaderia (Ministry of Agriculture and Livestock) MDG Millennium Development Goals MECIP Modelo Estdndar de ControlInterno delParaguay (Standard Model of Internal Control Manual) MERCOSUR Mercado Com6n delSur (Customs Union) MIC Middle-Income Country MIGA Multilateral Investment Guarantee Agency MoH Ministerio de Hacienda (Ministry of Hacienda) MOPC Ministerio de Obras P6blicas y Comunicaciones (Ministry of Public Works and Communications) MSME Micro, Small and Medium Enterprises MW Megawatt NCDs Non-communicable diseases NDP National Development Plan PAAP Paraguay Analytical and Advisory Program PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PISA Program for International Student Assessment PPP Public-Private Partnership PRMPR WBG Poverty Reduction Group PRODERS Proyecto de Desarrollo RuralSostenible (Sustainable Rural Development Project) R&D Research and Development RASs Reimbursable Advisory Services SEDAMUR Servicio deAtenci6n a la Mujer (Government domestic abuse helpline) SEDLAC Socio-Economic Database for Latin America and the Caribbean. SENASA Servicio Nacional de SaneamientoAmbiental (Government's Health Agency) SEPA Sistema de Ejecuci6n de Planes deAdquisiciones (Procurement Database) SERCE Second Regional Comparative and Explanatory Study SICO Sistema de Contabilidad (Integrated Financial Management System) SME Small and Medium Enterprise SOE State-Owned Enterprise STP Secretaria Tcnica de Planificaci6n (Secretary of Technical Planning) SWIFT Survey on Well-being via Instant and Frequent Tracking TA Technical Assistance T-Bond Treasury Bond UNDP United Nations Development Program UOC Unidades Operativas de Contrataciones (Decentralized Public Procurement Agencies) VAT Value Added Tax WBG World Bank Group The date of the last Country Partnership Progress Report was April 9, 2012 CURRENCY EQUIVALENTS (as of September 11, 2014) 1 United States Dollar = 4,281.92 Paraguayan Guaranies FISCAL YEAR January 1 - December 31 IBRD IFC MIGA Vice President: Jorge Familiar Karin Finkelston Keiko Honda Director: Jesko Hentschel Irene Arias Ravi Vish TaskTeam Leaders: Dante Mossi Salem Rohana Dan Biller Eugenia Marinova Frank Sader I. INTRODUCTION 11 II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA 13 A. Sociopolitical, demographic and institutional factors 13 B. Poverty and Shared Prosperity 15 C. Economic Developments and Outlook 19 D. Development Challenges 23 III. WBG PARTNERSHIP STRATEGY 31 A. Government Program and Medium-term Strategy 31 B. Proposed WBG Engagement 32 C. Proposed WBG Program 33 D. Implementing the FY15-18 Country Partnership Strategy 39 IV. MANAGING RISKS 43 ANNEXES 45 Annex 1. Results Framework - Paraguay Country Partnership Strategy FYI 5-18 46 Annex 2. Paraguay CPS FYI 0-14 Completion Report (CPSCR) 69 Annex 3. Monitoring and Evaluation of the CPS FYI 5-18 Results Framework 78 Annex 4. Portfolios of other Development Partners 83 Annex 5. Gender Analysis 86 Annex 6. Consultations with Stakeholders 91 Annex 7. Paraguay at a Glance 93 Annex 8. Operations Portfolio: IBRD loans, pipeline and non-lending operations 96 Annex 9. Trust funds 98 Annex 10. Survey on Well-being via Instant and Frequent Tracking (SWIFT) 99 Annex 11. Map 101 LIST OF FIGURES Figure 1: GDP per capita has Grown and Poverty and Inequality have Fallen, 2003-13 15 Figure 2: Employment in Construction is Growing Most Rapidly 16 Figure 3:Tekopor5 reaches a few people but is well targeted and has important impact on poverty reduction, 2013, and Private transfers also play an important role in protecting families from falling into poverty, 2003-13. 17 Figure 4: Labor Income is the Driver of Rural and Urban Poverty Reduction, 2003-13 18 Figure 5: Agriculture and non-tradables were dominant in GDP Growth (supply side, contributions to growth) 19 Figure 6.Total Investment is Low, particularly Public Investment 20 Figure 7: Paraguayan Public Sector Invest Less Than Other Countries in LAC 20 Figure 8: Agricultural Performance Drives Volatility 22 LIST OF TABLES Table 1: Paraguay: Selected Economic Indicators and Projections 24 Table 2: IBRD Portfolio FY10-14 39 Table 3: IFC portfolio (FY1 0-FY14) 39 LIST OF BOXES Box 1: Paraguay: Selected Economic Indicators and Projections 21 Box 2: IBRD Portfolio FY1 0-14 21 Box 3: IFC portfolio (FY10-FY14) 23 Box 4: The Paraguay Public Expenditure Review 27 AcknowLedgements The World Bank Group appreciates the contributions of the Ministry of Hacienda and the Secretary of Technical Planning of Paraguay, as well as of all participants in the consultations, particularly representatives of civil society organi5ations and the key development partners. The team benefited from inputs and suggestions provided by many teams from across the World Bank Group.  Introduction 1. Paraguay is undergoing a dynamic transforma- nance and Anti-Corruption, Poverty and Inclusive tion. While historically often lagging behind the eco- Economic Growth. During that period the WBG includ- nomic performance in the region, growth and poverty ed support during the global economic crisis of 2009 reduction kept pace with the 'golden decade' in Latin with policy based lending, along with investments to America recently: economic activity expanded on aver- improve basic infrastructure. On the private sector side, age by 4.9 percent annually from 2003 to 2013 while pov- IFCs portfolio saw a fourfold increase, making it the larg- erty was almost halved, dropping from 44 percent to 24 est multilateral institution in the country in terms of dis- percent during the same period. While land-locked, the bursements. IFC investments were particularly strong in richness in agricultural land and clean energy resources agribusiness, logistics and the financial sector, reaching have propelled the country to a significant, albeit volatile, over 30,000 farmers and guaranteeing trade flows worth private-sector led dynamism. The country is young with US$450 million. The CPS Completion Report (CPSCR) dis- the demographic window wide open. As a consequence, cusses the challenges and lessons learned during a period structural transformation from on- to off-farm, from rural marked by slow implementation of investment projects to urban, and from primary-to higher-value production and a changing political landscape which included a Pres- is in full swing. However, the private sector has outpaced idential impeachment process. public sector capacity, constraining crucial investment in service delivery, human assets, and infrastructure which 3. This CPS (FY15-FY18) supports Paraguay in im- are all vital for future prosperity and sustained poverty re- plementing its National Development Plan which duction. Deep-rooted governance problems and corrup- calls for eradicating extreme poverty. The document tion remains the Achilles heel of the country. Given its lo- presents a brief analysis of the country's challenges, and cation and resource base, Paraguay - and predominantly government program, followed by the proposed one its most vulnerable population - is especially exposed to WBG program for the FY1 5-FYi 8 period which will be de- climatic changes. In addition, environmental degradation mand-driven, selective and flexible, and will employ the is already significant with the country recording the sec- array of instruments available to WBG clients. ond highest deforestation level in the world. 1 Annual Report of Public Debt, Ministry of Hacienda, 2014. Year- 2. The last Paraguay CPS (FYO9-FY14) focused its ly multilateral disbursements for Paraguay have reached $230 and $210 million in 2012 and 2013, which as a reference were equivalent irto vFC disbursements to the private sector in those same years. IFsprfli a oufl nras,mkn9i h ag  Country Context and DeueLopment Agenda A. Sociopolitical, Demographic tional's 2013 Corruption Perception IndeX2), the GoP has and Institutional Factors been actively pursuing increased public transparency, with the recent passage of a landmark new law on access 4. Paraguay is a relatively young democracy that to information. Among other provisions, the law man- has undergone significant political liberalization over dates the public disclosure of all remunerations of pub- the last twenty five years. After the end of thirty-five lic employees. This is an important step in building effi- years under the rule of Alfredo Stroessner in 1989, an in- cient and transparent institutions that enable agency and terim administration paved the way for a new constitu- voice, and ultimately create the foundation for sustained tion adopted in 1992. This constitution strengthened the growth, elimination of extreme poverty and increased system of checks and balances with separation of power shared prosperity. into Executive, Legislative and Judicial Branches. None- theless, political decision making is vulnerable to vetoes, 6. The country is beginning to reap the benefits of institutions are nascent, and governance continues to be the demographic dividend with a median age of twen- a major challenge. ty-seven and a burgeoning potentially productive population. Forty percent of the population is between 5. Mr. Horacio Cartes was sworn in as President on 25 and 54 years old and another 20 percent between 15 August 15th 2013 on a platform to improve the invest- and 24. The large number of working age people will be ment climate, reduce poverty, improve governance, an important source of labor in the near future. Inequal- develop the lagging infrastructure of the country ity, while falling somewhat recently, remains persistently and generate jobs. The current administration made high. As such, it is a threat to capitalizing on the opportu- poverty reduction its overall objective and has prepared, nity created bya young workforce.This young population during its first year in office, a National Development Plan is searching for its voice, with only 6 percent of Paraguay- (NDP), which is geared to private sector job creation, so- ans expressing satisfaction with democratic institutions - cial inclusion and poverty reduction. The NDP includes an among the lowest levels in the region.3 Investing in edu- ambitious infrastructure development plan. Against the backdrop of high corruption perceptions in the country 2 Corruption Perceptions Index 2013. Transparency International, ranked 150 out of 177 in Transparency Interna- 2014, http://cpi.transparency.org/cpi21 3/resul ts. 3 People under 25 years of age who were very much satisfied with the democracy in Paraguay, www.atinobarometro.org, 2011. shre ropri9 cation and employability of the young, as well as creating cent of GDP coming from the hydroelectric complexes of an environment conducive to inclusive growth, are criti- ltaip6 and Yacyret6. There may also be prospects for oil. cal to help create more and better opportunities for this Drilling has started and, if successful, the country would young generation. be faced with the task to turn resource abundance into riches and preventing them from becoming a curse. Par- 7. The country's structural transformation is gain- aguay's contributions to the construction of Itaip6 will be ing momentum. Agricultural employment has fallen fully paid off in 2023, with the revenue stream then tri- from 30 to 20 percent over the last decade, while employ- pling - a unique opportunity for the country to finance ment in services, commerce and construction made up investments in public goods and basic services. The chal- the difference. Paraguay has the highest expansion rate lenge is to increase the efficiency of the public sector and of urbanization in South America, and inequality in the establish governance structures to manage this revenue urban space is growing. The private sector threatens to stream effectively and transparently. outpace the public sector's ability to provide supporting services. Low levels of connective infrastructure create 10. Paraguay has an open trade and investment re- unique challenges for a landlocked country with a rapidly gime that positions it well to benefit from abundant growing natural resources based economy. natural capital and the demographic dividend. Par- aguay ranks 13th out of 33 LAC countries in the Ease of 8. Agriculture's share of Gross Domestic Product Doing Business Report.' It is open to foreign investment (GDP) has grown over the last decade thanks in part and its legislation guarantees equal treatment of foreign to abundant land resources. Agriculture and livestock and domestic investors. Foreign trade has grown rapidly contributed 23 percent to GDP in 2013 and 86 percent of over the last decade, reaching 98 percent of GDP which total exports are food and agricultural products. Rising reflects the high degree of openness of the country. Pri- production and exports were achieved through both in- vate sector led growth is driving job creation. Both private tensification4 and the doubling of the cultivated area. A investment and consumption have been the dominant growing share of GDP in agriculture is an unusual pattern sources of growth in the last decade, with private sector for a middle-income country (MIC) and represents both investment accounting for 85 percent of total investment an opportunity and a challenge. The opportunity is that in the country. it represents an important source of sustainable wealth. There are two potential challenges. First, production is 11. While poverty has fallen significantly over the increasingly volatile as it is concentrated in few sectors past ten years, entrenched inequalities and exclusion that are heavily dependent on weather patterns and in- continue to create barriers to opportunity. Improve- ternational commodity prices. Recent studies reveal that ments have been particularly strong in reducing gender the Southern Cone (Argentina, southern Brazil, Chile, imbalances in endowments. However, women continue Paraguay and Uruguay) is highly susceptible to climate to be under-represented in politics and business. They shocks, mainly related to changing rainfall patterns and occupy only 12.5 percent of parliamentary seats and only rising heat extremes and this is expected to severely im- one in five firms had a top woman manager in 2011. In- pact maize and soy yields.' The second is that Paraguay digenous communities in Paraguay continue to be un- has one of the most unequal land distributions in the derserved with basic services. Indigenous people have world, making equitable growth a continuing challenge. substantially higher illiteracy than the general population and are often identified as the group most discriminat- 9. Paraguay's wealth of energy resources is both ed against in Paraguay Paraguay has one of the most an opportunity and a challenge for pro-poor eco- skewed patterns of land ownership in the world and the nomic management. Paraguay is one of the largest net most uneven in Latin America - with two percent of the exporters of electricity in the world with about four per- agricultural establishment occupying 82 percent of the _________________________________________ agricultural exploited land.8 4 The Food and Agriculture Organization reports that pesticide imports quadrupled in value from $58 million in 2002 to $248 mil- 6 Doing Business Report (2014). Paraguay profilewww.doingbusi- lion in 2012 and fertilizer consumption per hectare of arable land ness.org. increased from 60 kg nutrients to 80 kg. 7 www.latinobarometro.org, 2008 (p 65). 5 World Bank (forthcoming). Turn Down the Heat Ill: ECA, MENA 8 World Bank 2014. Paraguay: Evaluaci6n deTerrenos Nacionales and LAC. (P1 23711) 9ga' otiuin otecntuto fIap ilb Figure 1: GDP per capita Grew; Pouerty and Inequality FeLL, 2003-13 2500 20% 70 0.60 2,078 18% 0.55 2000 1,781 1,916 16% 600.2.5 S14% 1,565 181 12% 50 0.4805 .. ~10% 805 1500 1,680 8% 40 6% 44 41.3 43.7 41.2 0.45 1000 4 30 41.3 38.6 35.1 34.7 32 26.9 23.8 0.40 500 04% 10 21.2 18.3 16.5 19.0 18.8 19.4 18. 0.35 -6% 13.8 10.1 0 -8% 0 0.30 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual growth rates - GDP per capita (US$ constant 1994) -- Gini coefficient Poverty rate -*- Extreme overty rate Source: CBP and DGEEC. Note: Permanent Household Surveys 2003-13. Poverty and inequality are calculated on the basis of per capita household income which includes the following components: labor income, private and public transfers and capital income. Monthly extreme poverty line measured at the end of2013 was G 364,241 in the metropoli- tan area, 6 279,524 in other urban areas and 6 258,654 in rural areas per person, equivalent to US$3.4, US$2.6 and US$2.4 per person per day in 2005 Purchasing Power Parity, respectively Monthly moderate lines are set in 2013 at 6 607,855 in the metropolitan area, 6 435,067 in other urban areas and G 375,801 in rural areas, equivalent to US$5.7, US$4. 1 and US$3.5 per person per day in 2005 Purchasing Power Parity. B. Poverty and Shared Prosperity water sources (from56to 78 percent and from 65 to 88 percent, respectively). In terms of education, the country 12. While per capita income in Paraguay grew 22 has achieved almost universal access to primary school- percent between 2003 and 2011, extreme poverty re- ing and over 80 percent of children aged 15 to 17 are in mained persistently high. In 201 1,threeoutof 10 people school - more than 10 points higher than a decade prior. were living below the poverty line and 18 percent could Infant mortalityfell from 20 to 16 per 1,000 live births and not afford the basic food basket (the extreme poor), plac- maternal mortality fell from 174 to 100 per 100,000 live ing the country among the poorest in Latin America. In births between 2000 and 2010. Quality remains a prob- the eight years from 2003 to 2011, incomes of individuals em and in remote areas availability of water and electric- in the bottom two quintiles grew at a rate slightly above ity is often limited to a few hours a day. that of the mean person (4 and 3.3 percent, respectively), but this growth was not enough to significantly reduce 15. Macro-economic stability was the base for the the high levels of extreme poverty and income inequality positive growth, employment and poverty develop- (see Figure 1). ments. High rates of economic growth opened new la- bor opportunities also for the many poor in better paid 13. Since 2011 there have been substantial welfare sectors (such as construction and public administration) improvements. By 2013, moderate poverty fell to 24 per- and other types of employment (such as wage-agricul- cent, extreme poverty reached a historical low of 10 per- ture). The stable macroeconomic environment slowed cent, and inequality dropped below 0.48 for the first time growth in local food prices. In 2012 and 2013, food price in the last fifteen years. These changes reflect the rate of inflation fell, leaving the value of basic food items almost income growth among individuals at the bottom 40 per- unaltered. cent of the distribution (the first two quintiles) which was two and half times higher than that of the average person 16. Poverty reduction in rural areas is driven both by (14 and 5.6 percent, respectively). an increase in the number of people employed and higher average earnings of the employed. Over a third 14. Access to basic services has also improved but of the fall in poverty is associated with households add- quality remains a problem. Between 2003 and 2013, ing additional workers; both male and female (see Figure the country almost universalized access to electricity, 2). An additional third of poverty reduction comes from and increased access to sanitation9 and to adequate increased earnings. As a result, about two-thirds of the poverty reduction was driven by improved labor market 9 Sanitation does not include waste water treatment in this context. it sote iie t e ou9ady Figure 2: EmpLoyment in Construction has Grown Most Rapidly 240% 220% 200% 180% 160% 140% 120% 100% 80% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Agriculture Manufacturing Construction -*- Commerce/Hospitality -*- Public and private service Source: EPH, DGEEC. Note: Commerce and hospitality include commerce and restaurant and hotel services. Agricultural includes agriculture, animal husbandry, forestry, and fisheries. Commerce/food services also include workers in the hospitality sector. Public and private services include real estate and management services, public administration and defense, education, social and health services, private household services, external organizations, and other community, social andpersonal services. outcomes. For a household most likely to have exited poverty but still played an increasing role in protecting extreme poverty (the second through the fourth decile), households from falling into extreme poverty and as a the main source of labor income growth was wage gains, mechanism to cope with adverse shocks. Without these particularly in agriculture. While agricultural self-employ- transfers, the extreme poverty rate in rural areas would ment continues to be prevalent among the worst-off, in have been four percentage points higher. The elderly the past decade there has been a shift towards off-farm and female-headed households were receiving substan- agricultural salary jobs, suggesting a gradual reallocation tially larger family transfers, suggesting that migration of rural labor from less productive small farms to more is a household income diversification and coping mech- productive agribusinesses. In addition, non-agricultural anism. Finally, informal lending represents an important wage employment, such as construction and public ser- third mechanism which rural households use to cope vices, offered alternative sources of incomes that tended with potential shocks. Despite a lack of access to formal to be more profitable than own-farm earnings. Among financial markets (in 2011, only 3 percent of the bottom the bottom 40 percent of the income distribution, indi- 40 reported having a bank account), 21 percent of rural viduals more likely to take on these improved opportuni- Paraguayans reported having loans, often obtained from ties in agriculture and non-agriculture wage employment friends and family (see Figure 3). were men and women of working age (30-45 years old) and concentrated in specific departments, among them 18. The halving of urban poverty is associated with those of the Central region. significant improvements in the urban labor market. The 79 percent fall in urban poverty from 2003 to 2013 17. Non-labor income, especially public transfers is due to increased labor earnings and employment lev- such as Tekopord and Adultos Mayores, accounted for els. Higher earnings, for both men and women, were the the remaining third of the decline in rural poverty. The primary drivers of urban poverty reduction, accounting conditional cash transfer Tekopord, targeted to poor fam- for almost 60 percent of the overall change. This rise in ilies with school aged children, offers a sizeable transfer labor income is associated with growing earnings of the (on average 20 percent of household income among the self-employed and workers in small firms as well as with extreme poor) but its coverage is still fairly low. In 2013, a surge in the higher-paying large firm sector (such as only 6 percent of the extreme poor rural families and 4 construction and public and private services) among low- percent of those living in moderate poverty were receiv- skilled workers. Among the bottom 20 percent, the better ing this transfer. Family transfers may not have been an educated, particularly men and those living in the main important driver behind the change in the incidence of metropolitan area (Asuncion and Central), were more 9oshlsfo aln noeteepvryada Figure 3: In 2013, Tekopora Reached Few People but Was WeLl Targeted With Important Pouerty Impacts (Left); Private Transfers Played an Important Role in Protecting FamiLies from FaLing into Pouerty (right), 2003-13. 25% 7 ~- 6 20% 6 5 15% -~ 4 o~ 3 10% V) ~-2 5% Extreme poor Moderate poor Non-poor 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Proportion of households reporting Tekopora - Rural Urban m Mean share of household income Source: Calculations from EPH. Note: The values for 2012 in the figure on the right are the average of 2011 and 2013 ond donotinclude the EPH microdata as these ore preliminary and subject to change. The figure reports the extent to which the estimated extreme poverty rate would be higher if households were not receiving family transfers. likely to be employed in higher-wage large firms and the study found that, while access to treated water stands at public sector. In addition, the number of income earners 86 percent, reliability and quality are lacking. This is es- in the households increased as the unemployment rate pecially true among poor rural households where 40 per- declined and female employment increased from 37 to 46 cent of the population does not have home connections. percent (see figure 4). Less than 10 percent of the population is connected to sanitary sewers, and there is no waste water treatment in 19. The two main challenges to the sustainability of the country. poverty reduction in the last two years are vulnera- bility of the poor and near-poor and inequality of op- 21. Although Paraguay has achieved universal ac- portunity for the poor. First, while employment oppor- cess to primary education, its education performance tunities have expanded, a large share of the population is among the weakest in Latin America. Specifically, re- still faces a volatile economic environment both in rural suits from the "Laboratorio Latinoomericano de Evaluaci& and urban areas. In rural areas more than two-thirds of de lo Calidad de lo Educoci6n" (Latin American Education the extreme poor are largely self-employed in agriculture, Quality Evaluation Laboratory - LLECE) place Paraguay as a highly volatile sector. In urban areas, the informally em- one of the worst performing education systems in the re- ployed are especially exposed to fluctuations in the econ- gion, trailing only Ecuador in the share of students who omy and largely untouched by minimum wage legisla- score below a level 1 proficiency in basic mathematics tion. In addition, a sizeable proportion of those above the competencies. Similarly, the national standardized test extreme and moderate poverty lines have incomes close SNEPE (2010) shows that only one in four students in third enough to these thresholds so that small changes in the grade has the required level of math and communication economy or in the price of basic goods could push them skills, and that performance in communication is even back into poverty. Second, the inadequate quality of basic lower among students attending rural schools. services, such as health, education, water and sanitation, uninterrupted electricity especially among the most vul- 22. Despite improvements in both infant and ma- nerable segments of the population contribute to a lack ternal mortality, Paraguay is unlikely to achieve the of opportunity and compromise the country's path to- health-related MDGs.11 The country suffers from a dou- ward an equitable and prosperous society. ble burden given that perinatal, nutritional and commu- nicable diseases continue to cause a significant number 20. Services such as water, sanitation and electricity r8inefficient resource allocation. A recent 10 The three health MDGs are child mortality, maternal mortality, sand the incidence of HItAIDS, malaria and other major diseases. saiayswes n heei owat ae9teteti Figure 4: Labor Income Was the Driver of Rural and Urban Pouerty Reduction, 2003-13 Rural Urban Male labor income 26% 36% Male labor employment level 25%_Labr_69%825% 8% Labor 69% Labor 79% Female labor income 9% 23% Female labor employment level 9% 12% Family transfers 12% 9% Tekopora and adultos mayores 12% 4% Other non labor income 18% 26% -10% 10% 30% -10% 0% 10% 20% 30% 40% Source: Methodology based on Barros, R, M. Carvalho, S. Franco, and R. Mendoca (2006) "Uma Andlisis dos Principoes Causas do Queda Recente no Desigualdade de Renda Brasileira" Revista Econ6mica, vol. 8(1), pp. 117-147. Note: This analysis, also known as the Shapley Decomposition, separates changes in poverty rates by income source. of deaths while the burden of non-communicable dis- Improvements have been particularly strong in women's eases (NCDs) is on the rise. Easily preventable diseases endowments: Indicators for sexual and reproductive such as yellow fever, dengue and other mosquito-borne health have improved although the country still lags be- transmissions, have become endemic in Paraguay, with a hind the LAC region in other dimensions, particularly in doubling of dengue cases from 2011 to 2013. While there maternal mortality and skilled birth attendance. Educa- have been efforts to combat these diseases, structural tional outcomes for girls (attainment and achievement) issues related to social determinants on health such as have improved and today girls outperform boys. In recent education, water and sanitation impede the successful years there have also been important improvements in control of diseases. Access to health insurance, through the legal framework for gender equality. While the lev- the Social Prevision Institute (IPS)," is low (29 percent in el of female labor force participation has risen, the rate 2013). Access is unequal across areas and socioeconomic is still significantly lower than for men and several other groups reaching more than half in Asuncion and among labor market indicators - such as unemployment risk or the richest income quintile but fewer than five percent in informality- are higher for women, pointing to structural the poorest income quintile. disadvantages. 23. Social insurance is low both in terms of contrib- 25. Paraguay's indigenous people continue to be utors and beneficiaries, the institutional framework considered the most vulnerable social group of Par- is fragmented and few instruments are available. The aguay. There are about 20 different indigenous ethnic pension sub-system covers less than 15 percent of the el- groups comprising around 115,000 people (1.7 percent of derly. This is a consequence of the high degree of infor- the country's total) with the large majority living in rural mality in the labor market, which in 2011 was 65.8 percent areas (around 91.5 percent) .12 Language is an important of the total employed population (20 percentage points reference for many of the indigenous peoples as more higher than the average in [AC). No other contributory than three-quarters of the indigenous people speaks the sub-system is in place; neither unemployment insurance language of their respective ethnicity (there are five main nor family allowances, linguistic groups). Most indigenous people lack legal ti- tles to their traditional territories,13 only 2.5 percent have 24. Paraguay has made progress over the last de- access to potable water and 31.2 percent to electricity.14 cade in promoting women's empowerment and gen- der equality, but important challenges still persist. 12 Third National indigenous Census. Preliminary Results, Para- guay, 2012. S 13 Country Technical Note on Indigenous Peoples Issues, Para- 11 IPS health insurance covers the formal worker and his/her off- guay, November, 2012, http://www.ifad.org/english/indigenous spring until 18 years of age and parents if they are dependent of the pub/ocuments/tnotes/paraguayen.pdf direct affiliate. 14 Paraguay. Pan-American Health Organization, 2011 caei9rmtn oe'sepwretadgn Figure S: AgricuLture and non-tradabLes were dominant in GDP Growth (supply side, contributions to growth) Industry and Mining, 0.3 Gas, Electricity, Water, 0.4 Cattle, Forest and Fishing, 0.3 Constrution, 0.2 C t N on trad ables, 2.8 Trade and Services, 2.2 Agriculture, 1.2 Source: CBP Illiteracy among indigenous people is estimated at 38 the business environment. In addition, the commodity percent (seven times higher than the national average), boom and strong external demand supported stabiliza- morbidity at 30 percent, and only 39 percent have con- tion and economic recovery. Fast export growth under- sulted a physician about ailments or accidents. Labor pinned a strong upturn of private consumption and in- force participation is 52 percent - lower than the nation- vestment. As a result the GoP had eight consecutive years al average - and more than four fifths of those working of overall budget surpluses during 2004-2011, and public are employed in the primary sector (agriculture, hunting debt fell by almost 30 percentage points as a share of and fishing). Public expenditures targeted to indigenous GDP within the last decade. Inflation levels also decreased communities and people amounted to 0.2 percent of the from an annual average of 10 percent in 1994-2003 to 6 national budget in 2012.15 Promoting income generation, percent in 2004-2013. enabling access to basic services (water, sanitation and health, decent housing and electricity), and restituting 27. Paraguay is rich in natural resources which, if well and finalizing titling of indigenous lands are the main managed, could accelerate poverty reduction and ex- strategies for improving the well-being of Paraguay's in- pand shared prosperity. Paraguay has one of the best digenous peoples that are foreseen in the NDR16 hydrological endowments in the world, mainly due to the hydropower plantS17 which make it a leader in clean ener- C. Economic Developments and Outlook gy production and a net exporter of electricity. Electricity exports represent about 4 percent of GDR Prospects for 26. Robust economic performance was underpinned oil are present, as exploration drilling has started this year by a solid macroeconomic framework. Paraguay suf- in El Chaco region. fered from recurring and costly financial distress in the late 1990s, which was aggravated by weaknesses in the 28. Modernization of the agricultural sector has been financial system and the contagion from the regional thebackboneofeconomicgrowth.Overthe lastfifteen crisis in 2002. In response to that crisis, the GoP adopted years, Paraguay has witnessed a shift from a traditional an ambitious stabilization program in 2003, supported and family-based agriculture to one which is modern and by Stand-By agreements with the IMF which supported based on agribusiness with high-rent products (mainly significant structural reforms and resulted in improved soy and beef) and oriented to foreign markets (mainly Bra- fiscal revenue mobilization, the modernization of tax and zil and Russia). Exports, driven by the agricultural sector, custom administration, improvements in the regulatory framework of the financial sector and improvements in 17 The hydroelectric plants of Itaip6 (14,000 MW) and Yacyret6 (3,200 MW), are both bi-national entities shared with Brazil and Ar- gentina, respectively. Paraguay's share is 8,810 MW, with low pro- 15 Elaborated from the Boost Database, Ministry of Finance. duction costs, and the excess production over domestic demand is 16 Paraguay National Development Plan, May 2014. exported to Brazil and Argentina, respectively. ofoealbdgtsrlssduig20-01,9dpbi Figure 6. Total Inuestment is Low, particularly Figure 7: Paraguayan Public Inuestment Is Less Public Inuestment Than in Other Countries in LAC 20 30 15 25 15 5 1 10 0 5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Public/GDP + Total/GDP - Private/GDP - Brazil Mexico - Paraguay Peru - Uruguay Source: GoP and CBP Source: WDI and CBP have experienced sharp increases within the last decade, GDP, this is relatively low. And considering that LAC invests jumping from 4 percent of annual growth in 1994-2003 to much less than fast growing East Asian economies, Para- 15 percent in 2004-2013. This has contributed in turn to guay's investment levels are especially low by internation- an almost tenfold increase in foreign reserves since 2002 al comparison.The private sector has been the main driver (from US$640 million to US$5,871 million). Imports also of investment with an investment to GDP ratio of about increased substantially, growing by 22 percent annually 13-14 percent. Central Government investment in Para- during 2004-2013, compared to 4 percent in 1994-2003. guay has been stable around 2.5 percent of GDP This is Imports were encouraged by the need for more and bet- almost half of what other countries investing in LAC, such ter capital goods to support agricultural transformation as Mexico, Peru or Uruguay (see Figures 6 and 7). and an appreciating domestic currency. 31. The concentration of the economy in agriculture 29. On the supply side, agriculture was the second has increased volatility. Paraguay's economic perfor- biggest contributor to GDP growth after trade and mance closely tracks the agricultural production of its top services, while on the demand side private consump- three commodities in terms of export and production val- tion was the driving factor. During 2003-2013 about 1.4 ue: soy, beef, and maize."' The dynamics of GDP growth percent points of the 4.9 percent annual average GDP reflects an increase of volatility of agricultural GDP as growth came from the expansion of agriculture, while the agricultural share in the economy has increased over trade and services contributed 3.2 percentage points. On time. Overall, agricultural GDP in Paraguay is far more vol- the demand side private consumption was the engine of atile than the aggregate. Weather related shocks alone growth, contributing on average 3.9 percentage points to account for more than 50 percent of agricultural GDP vol- yearly GDP growth. Another 1.4 percentage points of the atility (See figure 8 and Box 1F)i1g average yearly growth came from total gross fixed capital formation. Agricultural expansion had a positive impact on both private consumption and total investment. Due to strong external demand the contribution of net ex- 32. The economy continues to expand based on fa- ports to growth was also positive (See Fig. 5). vorable agricultural output and commodity prices. Boosted by agricultural production and exports, GDP 30. Paraguay invests less compared to its regional growth bounced back to 13.6 percent in 2013, following a peers. Total investment has been only around 16 percent of GDP over the last decade. Compared to many other 18 FAOStat, http://faostat.fao.org/site/666/default.aspx LAC countries which invest about 20 percent or more of 19 Growth Volatility in Paraguay: Sources, Effects and Options, World Bank, 2013 9nbt rvt osmto n oa netet u Economic uoLatiLity is high in Paraguay Growth uoLatility is driuen by externaL shocks and agricuLturaL sector. In collaboration with national authorities, the WBG undertook a uoLatility study in 2013 to eualuate its sources and impact on the economy, with a uiew to deueLop poLicies for mitigating the impact of uotatiLity. According to the findings, about haLf of growth uoLatility comes from externoL shocks, particuLarLy external demand and worLd interest rates. The other hatf stems from internal shocks, with a higher impact on agricultural production than total GDR Most of the uuLnerabiLity affecting the agricultural sector is related to exogenous shocks such as weather conditions (droughts and floods) and fluctuations in internationaL commodity prices. The Larger weight of ogricuLture in the country's GDP has increased oueratL GDP uotatility in recent times, putting Paraguay among the top countries with the highest uoLotility in LAC. Such high LeueLs of uotatility haue negatiue outcomes in terms of ochieuing sustainable economic growth and continuous pouerty reduction. In the short run, it affects sectors Linked to the agribusiness chain such as transport, trade and rinancial seruices. In the medium-run, the consequences faLL mostly on infrastructure and inuestments in general, pushing them below their potential. ALL of these haue fiscal reuenue impLications, making reuenue coLLection unstable and unpredictable, thereby decreasing the gouernment's margin to tackle pouerty and reduce inequality. Public policy should then be concentrated in risk management by deuising instruments that heLp auoid or mitigate certain economic shocks. Diuersifying the economy, preuenting foot-and-mouth disease, establishing fiscol ruLes and creating stabiLiZation funds are some of the options to strengthen the resiLience of the Paraguayan economy. A further study on agriculturaL risks had the objectiue to identify, quantify and prioritige those risks, and propose poLicy options to reduce the uolatility of sectoral output and family forming income. The study shows that, on auerage, Paraguay Loses about 5 percent of the agricultural GDP due to production risks that couLd be managed. The most notable risk is drought, whiLe animal health problems such as foot and mouth diseases aLso hauing significant economic consequences. Export prices for famiLy form products, such as sesame and cotton, are subject to Large Luctuations which are transmitted directly to the producers. Consequently, rural pouerty in Paraguay is cLosely Linked to uuLnerability to agriculturoL risks. Paraguay's reforms to increase fiscal discipLine and Limit the growth of current expenditures The Paraguayan Legislatiue Branch approued a Fiscal Responsibility Law (FRL) at the end of 2013. The FRL supports stability and sustainability of public finances. It also estabLishes muLti-annual budgeting and the need to attach a debt sustainability analysis and estimations of some macroeconomic uariables to the budget proposals in order to prouide more predictabiLity to medium term fiscaL poLicy. To increase fiscal discipLine, the FRL sets an upper Limit of 1.5 percent of GDP for the fiscaL deficit for any giuen year, unLess there is a case of national emergency, internationoL crisis or a downturn of economic actiuity. In addition, the Law puts Limits on wage increases and public primary current expenditures. In this regard, the FRL prouides a sound anchor to underpin fiscaL sustainability. Nonetheless, stronger budget institutions are needed to improue the quality of spending, along with strengthened tax and customs administration and capacity to deal with potential risks from Public-Priuate Partnerships (PPPs). In fact, the FRL is wideLy seen as a first important step but stiLL insufficient in ensuring Long term fiscal sustainability as the Low does not estabLish penaLties for deuiations (e.g. when the fiscal deficit exceeds 1.5 percent of GDP). Figure 8: Agricultural Performance Driues VoLatiLity Agricultural GDP growth volatility is the main factor Growth volatility has recently increased behind GDP growth volatility (20-quarter standard deviation of year-on year growth) 40 25 30 20 20 10 15 10 -10 -20 -30 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 -- - oo GD Arcutra D rC=, aN C5 W~ C3",e N ~ GDP - Agricultural GP- Primary Secondary - Tertiary Source: CBR Note: *projected. Source: World Bank calculations based on CBP data. contraction of 1.2 percent in 2012. GDP growth is expect- percent of GDP respectively in 2012 and 2013. The re- ed to be moderate at 4.8 percent in 2014 according to the cent deterioration in fiscal accounts was mainly a result CBP's most recent estimates. of weak performance of revenue collection, in particular the selective consumption tax and import taxes, despite 33. Inflation remains low and is closely monitored. In a strong economic expansion. The Government adopted 2013, consumer price inflation was 3.7 percent and annu- measures at the end of 2013 to curb the declining fiscal al consumer price inflation has remained within the CBP's balances and enable the expansion of fiscal space for in- target range (2.5 - 7.5 percent) for the seventh year in a vestments. These measures included the approval of the row. For 2014, the inflation rate is estimated to be around Fiscal Responsibility Law (FRL) to enhance fiscal discipline 5 percent. In February 2014, the CBP initiated a monetary and stability as well revenue enhancement measures to contraction by increasing its policy rate from 5.5 percentto improve tax collection (see Boxes 2 and 3). Historically, 6.75 percent.The rate has been kept at this level since then. Paraguay has had low tax efforts and the tax-to-GDP ratio remains one of the lowest in LAC. The GoP has set long 34. The external sector continues to perform strong- term revenue targets and is putting efforts to increase tax ly, leading to currency appreciation and increase in revenues. reserves. Following the surplus of 2.1 percent of GDP in 2013, the current account surplus was 1.3 percent of 36. Public debt is low and stable, yet it is expected GDP during the first quarter 2014. Paraguay's chief export to increase gradually. Public debt fell slightly from 14.4 products are soy and beef, contributing to 38 percent of of GDP in 2012 to 14.1 percent of GDP in 2013. Central the total in 2013, with Brazil (30 percent) and Russia (10 Administration debt represents about 91.1 percent of to- percent) as the main export destinations.20 The exchange tal public debt. Public debt is mostly external (almost 80 rate appreciated gradually, while the stock of interna- percent) and denominated in United States Dollars. The tional reserves reached US$7.1 billion in October 2014, authorities have decided to take advantage of historical exceeding 7 months of imports -- about 10 times higher low interest rates and improved access to international than a decade ago. capital markets to finance an ambitious investment pro- gram in the next years. Following a successful sovereign 35. The fiscal deficit remains below two percent. bonds issuance of US$1 billion in August, public debt is Government budget deficits were 1.7 percent and 1.9 expected to increase to 18.5 percent of GDP by the end of 2014. 20 Without considering the European Union as a trade bloc vetet.Teemaue9ncue h prvlo h Paraguay is determined to enhance fiscal reuenues In spite ofsignificant progress in strengthening fiscal poLicy framework, pubLic reuenues are stiLL Low in Paraguay. A tax reform in 2004 helped to raise tax reuenues from 8.7 percent of GDP in 2003 to 12.1 percent in 2011. Nonetheless, tax reuenues haue stagnated around 12 percent of GDP in the Last two years. This is significantly Lower than the LAC auerage of 18 percent. To address the chaLLenge of Low fiscal reuenues and thereby support growth enhancing inuestment and pouerty reduction programs, the GoP has adopted, since 2013, seueral fiscal measures aimed at increasing public reuenues. Tax poLicy reforms included an increase in the VAT rate applied to the financioL sector from 5 percent to the standard rate of 10 percent, as weLL as defining a VAT coLLection base for agricultural products (5 percent rate). It is expected that these actions wouLd generate about 30 percent increase in total VAT coLLection by 2016. Moreouer, a new agricuLture sector corporate tax (IRAGRO) was introduced in December 2013, both to boost fiscal reuenues and to make the tax system more progressiue. IRAGRO broadens the tax base and is expected to increase the contribution of the agricultural sector to total tax reuenues from 6 percent to around 9 percent by 2016. In paraLLeL, the tax administration office (SET) is in a process of strengthening its institutional capacity. The GoP is targeting an 18 percent of tax to GDP ratio by 2030. space for the expansion of investments. Here, though, im- plementation capacity remains a core bottleneck for the 37. The macroeconomic outlook is favorable overall; country. however some vulnerability will remain in the short run. As shown in Table 1, Paraguay's economic growth 39. Inflation prospects are also favorable. The ad- is expected to return to historical levels between 4.5 herence of the CBP to the inflation targeting regime in percent and 5 percent in the few next years (4.8 percent recent years is likely to have inflation expectations con- expected for 2014 according to CBP's data). In the me- verging to the center of the target band (5 percent) from dium-term, GDP growth is expected to increase and be 2015 onwards. less volatile as the GoP's macroeconomic framework is maintained and structural policies are expected to foster 40. The IMF carries out annual Article IV consulta- private investment, improve productivity and encourage tions. The latest Article IV consultation report was issued economic diversification. Nonetheless, droughts, floods in February 2014, with a positive overall outlook for the as well as other climatic phenomena are expected to still country. The Bank and IMF teams consult each other reg- have a strong influence on GDP growth. As Paraguay is ularly and through bi-annual country-team level consul- a small and increasingly open economy, it will continue tations. to face downside risks such as fluctuations in interna- tional demand and commodity prices for its agricultural D. DeueLopment Chalenges exports. In relation to this, a weak economic outlook for Brazil and Argentina is an additional source of risk for the 41. Paraguay's development agenda includes a Paraguayan economy. combination of new challenges to ensure sustain- ability of recent gains in growth, poverty reduction 38. On the fiscal front, projected increases in fiscal and shared prosperity, and long standing structural revenues and the strict control of recurrent spending obstacles. Emerging new challenges include improv- will support the expansion of public investments con- ing resilience to risks and vulnerability in order to pre- sistent with a prudent increase of indebtedness. Fiscal serve and build on the gains in poverty reduction and deficits are projected to be around 1.5 percent of GDP in shared prosperity of the last few years. Long standing 2014 and 2015, with a gradual improvement in the follow- structural obstacles include strengthening pro-poor ing years. The full implementation of the FRL is expected service delivery, including access and quality, and fos- to limit the growth of recurrent spending, creating fiscal tering inclusive markets. reetyasislkl ohveifainepe9toscn Paraguay: Selected Economic Indicators and Projections Actual Projections (annuaL % change, unLess otherwise stated) Income and prices Real GDP 4.3 -1.2 14.2 4.0 4.5 4.5 4.5 Nominal GDP 14.6 0.0 14.7 7.8 9.5 9.5 9.5 Consumer prices (eop) 4.9 4.0 3.7 3.7 5.0 5.0 5.0 Nominal exchange rate 4439.9 4288.8 4524.0 .. (Guarani per USD, eop) Monetary sector Currency issue 11.6 17.5 13.2 10.1 18.1 11.5 11.5 Credit to priuate sector 24.8 12.6 23.9 19.0 21.0 19.0 18.0 Liabilities to priuate sector 13.9 12.2 23.8 17.2 19.0 18.4 17.2 External sector Exports, percent uolume change 2.0 -3.6 23.6 3.9 5.9 4.3 4.6 Imports, percent uolume change 13.8 -11.0 7.2 4.5 5.2 5.1 5.1 Real effectiue exchange rate 13.4 -0.3 -2.6 .. (% of GDP, unLess otherwise stated) Current account 0.5 -1.0 2.1 1.1 -1.1 -0.6 -0.7 Merchandise exports, percent of GDP 53.6 47.7 45.7 44.3 41.1 39.6 38.6 Merchandise imports, percent of GDP 50.1 44.3 40.1 39.6 37.4 36.3 35.5 Net international reserues 4983 4994 5871 7240 7280 7285 7300 (in miLLions USD) (Stoc& in months of imports) 4.3 4.5 6.2 7.5 7.1 6.6 6.3 Fiscal accounts Central gouernment reuenues 18.0 19.0 16.6 18.1 19.1 19.5 20.0 o/w Tax reuenues 12.6 12.7 11.5 12.7 13.4 13.7 13.9 Central gouernment expenditures 17.3 20.8 18.6 19.8 20.6 21.0 21.5 Central gouernment oueraLL balance 0.7 -1.8 -1.9 -1.7 -1.5 -1.S -1.S GeneroL Gouernment debt 11.5 14.1 14.2 19.0 18.0 17.2 16.8 Memorandum items Nominal GDP (in biLLions of Guaranies) 105,203 108,832 124,853 134,530 147,310 161,304 176,628 Nominal GDP (in biLLions of USD) 23.3 24.9 28.1 30.0 33.4 36.2 38.8 Per capita GDP, current US$ 3814 3680 4137 4337 4749 SOS7 5338 Sources: IMF Article IV, Central Bank of Paraguay, Ministry of Finance of Paraguay, World Bank staff estimates and projections. 42. With the'golden decade' of growth coming to a ly has created disincentives for diversifying the economy close, Paraguay is confronted with the task of over- beyond agriculture. Lack of access to finance and under- coming development challenges while managing development in financial literacy exacerbates the risks its structural transformation. The challenges include and the impact of volatility on the poor. Heavy reliance unequal land distribution, substantial differences in en- on agriculture also creates challenges for environmental dowments and opportunities between the poor and sustainability. non-poor, and concentration of economic activity and indirectly public revenues in an agriculture sector depen- 45. Households have few risk mitigation instru- dent on an increasingly volatile climate. At the same time ments, and this is further hampered by lacking access the structural transformation is well underway, with jobs to the financial system.21 About 45 percent of adults do moving from on to off farm, people moving from rural not have an account or borrow at a formal institution, use to urban space and production moving from primary to mobile money services, or have insurance. They receive higher-value. their wages and transfer domestic remittances in cash only. These adults are disproportionately poor, have a 43. Thanks to its abundant natural resources wealth, primary education or less, and are unemployed or out of Paraguay is well positioned to ensure that the under- the work force. With only 29 percent of the adults having lying conditions necessary to overcome the challeng- an account at a formal institution, account penetration in es and facilitate the transformation are in place. Man- Paraguay is significantly less than the regional average (39 aging the risks associated with economic activity that is percent). Variations in the ownership of formal accounts increasingly concentrated in a few sectors will be key to track closely demographic and socio-economic charac- making sure that the rural poor are not disproportion- teristics. The largest gaps are related to income and edu- ately vulnerable to volatility and the gains from the last cation levels, though there are also significant differences decade are not lost. Boosting pro-poor delivery of public across rural and urban populations, employment catego- goods and services such as education, health, and basic ries, and regions. Access in rural areas is particularly low, infrastructure is critical to creating better opportunities with only about 10 percent of the population reporting for the more disadvantaged segments of the population having an account and less than 8 percent reporting any and putting in place the conditions to reap the benefits of savings. This combination of low savings and poor access the demographic dividend going forward. to formal financial institutions poses a challenge in the event of household shocks. Promoting sound financial inclusion will be essential for helping poor households to improve their livelihoods and reduce their vulnerability to shocks and emergencies, by enabling them to build as- 44. The commodity and climate related exposure sets, smooth consumption and manage risks. Furthering risks are creating challenges for Paraguay at both responsible and sustainable access to financial services macro and sectorial levels. Paraguay is a relatively small for poorest households will also require strengthening open economy with increasingly higher exposure to ex- the regulatory and supervisory framework -particularly ternal shocks. While the favorable global environment of for non-banking financial institutions- as well as enhanc- commodity prices supported the economic recovery af- ing financial literacy, consumer financial capabilities, and ter 2002 with important dividends to the society, reliance consumer protection mechanisms. on few agricultural products in limited markets has led to increased volatility of GDP. Shocks are mostly driven by 46. The sustainability of Paraguay's growth model is the agriculture sector through commodity price fluctua- under threat from environmental degradation. Apart tions, weather changes and animal diseases such as foot- from significant climate risks, rapid agricultural expansion and-mouth disease which have interdependence to the and intensification creates serious challenges to sustain- macro-fiscal framework. In addition to posing direct chal- ability. Agricultural expansion is contributing to the sec- lenges to households whose primary source of income is ond highest deforestation rate in the world (13,000 ha per from agriculture, volatility also has a significant impact on tax revenues and fiscal planning and management. 21 All figures are from the 2013 financial inclusion survey carried Moreover, not taxing the agricultural sector until recent- outbyThe CBPwhichincorporatedan expanded version ofthe stan- dardized Findvex questionnaire. met,ad hsi urhrhmerdb akigacs year) according to the World Wildlife Fund (2013) and the of such opportunities, leading to effective program and consequent loss of unique and valuable biodiversity. For- budget execution. Fiscal space for the necessary invest- ests also play a valuable role in stabilizing local hydrology, ment demand requires increasing tax revenues. Shifts which is important for a country so dependent on hydro- towards progressive taxes and expenditures would make power, as well as for soil conservation (again, critical for the effect of fiscal policies significantly more pro-poor. a country dependent on agriculture). Intensification and the associated increase in use of fertilizers and pesticides 49. Low revenue mobilization has traditionally con- contribute to the contamination of water resources. Un- strained the Government's ability for public invest- planned urbanization is also contributing to water prob- ment. Paraguaytax revenue potential is underdeveloped. lems, particularly around Asuncion where disposal of un- Fiscal consolidation has been critical for improved growth treated wastewater is contributing to the eutrophication and macroeconomic stability. Current expenditures, how- of Lake Ypacarai. While there has been substantial prog- ever, were affected less by the consolidation while space ress in the last decade in bringing down the rate of de- for investment was limited. The share of current expendi- forestation and improving water resources management, tures was about 75 percent of the total government ex- enforcement of environmental legislation and regulation penditures in 2013. Along with low institutional capacity remain weak due to low institutional capacity, overlap- in budget execution, this has hampered the government's ping and at times with conflicting institutional responsi- ability to address serious infrastructure bottlenecks to bilities and weak governance. improve service delivery and the country's prospects for higher and sustained integrative growth. 47. Addressing key issues related to climate change will also help reduce agriculture based risk and vola- 50. Spending on social infrastructure is low and tility. Land use change and forestry are the largest con- needs to be better targeted to the poor. Improving tributors to greenhouse gas emissions in the country. Ag- access to and quality of public services for the poor is riculture is highly vulnerable to climate variability and this, critical to helping them emerge from, and remain out of, coupled with problems of land degradation in the country, poverty. Spending on social and basic services remains contributes to increased volatility. The emission reduction very low compared to other countries in the region. For potential is large, particularly through improved agricul- example, public investment in education has declined tural practices and reforestation. Carbon trading opportu- since the beginning of the 2000s, from 5 percent of GDP nities may also be an opportunity worth exploring, to 4 percent, below the regional average of 5 percent of GD P22 Moreover, public investments on education are concentrated in Asunci6n and other urban areas. Public expenditure on health has increased to four percent of GDP in 2011 but remains among the lowest in the region. 48. In order to capitalize on its opportunities, Par- Access to health services is very limited in the remote ru- aguay needs to improve its public sector capacity ral regions of the country. of service delivery. Paraguay's young population is a window of opportunity for the country to accelerate its 51. The existing tax regime is regressive. In addition to growth and economic development. The expected future a low level of taxation, taxes are also regressive, further ex- income from Itaipe is another significant opportunity to acerbating inequality. They are regressive because of their propel the country to upper-middle income levels. How- heavy dependence on indirect measures such as the VAT, ever, the demands on the country during this transition which accounted for 53 percent of total tax revenues as of are many. With a large portion of its population still lack- July 2014. Incidence analysis carried out in 2010 shows the ing access to vital and quality services in rural areas, mi- bottom xecile paying an average of 43 percent of income gration to cities requires increased employment gener- in indirect taxes, resulting in increases in extreme poverty ation in modern sectors, especially for the young. Large from 14 percent based on disposable income (market in- investments in infrastructure are needed to improve re- gional connectivity and access to markets, particularly for 22 Low investment in education and a very young demograph- the poor as well as small firms. The key to success will be ic profile explain the five-fold difference in public expenditure per raising state capacity and governance to take advantage primary school pupil between Paraguay and the other MERCOSUR members. 9iismyas ea potnt ot xlrn.t ecn,blwtergoa vrg f5preto The Paraguay Public Expenditure Reuiew A Public Expenditure Reuiew (PER) was carried out by the WBG in coLLaboration with the GoP between 2013 and 2014. The purpose of this study was to answer the foLLowing question: Has fiscal policy in Paraguay contributed to pouerty reduction and shared prosperity, giuen the structure and chaLLenges of the economy? The PER concludes that there has been some progress in fiscat poLicy during the Last decade, with increasing fiscal consolidation (sustained fiscal surplus in 2004-2011 and Fiscal Responsibility Law approued at the end of 2013); a continuously decreasing debt-to-GDP ratio; Larger socioL expenditures; and higher reuenue coLLection (tax reform in 2004 and implementation of an Agricultural Income Tax Low (IRAGRO) at the end of 2014). Despite these achieuements, seueral chaLLenges stiLL remain. In the short-run, there is a need of turning fiscal poLicy from pro-cyclical to counter-cycLicaL, so as to buffer negatiue shocks and preuent the economy from ouerheating. In the Long-run, increasing inuestment LeueLs as weLl as the accumuLation of physicoL and human capital are needed to ensure sustained economic growth. In fact, the study finds that both reuenues and expenditures are rather Low in comparison to other LAC and Lower-middLe-income countries, in particuLar tax coLLection, social and capitaL expenditures. In addition to being Low, public spending in Paraguay is not efficient and is not progressiue. The latter is especiaLLy reteuant in social sectors Like health and education, which reueaL a Lack or progressiue spending and euen shows some regressiue spending for some expenditure categories. These chaLLenges preuent fiscal poLicy from being a main player in reducing pouerty and promoting shared prosperity. come, less direct taxes, plus direct transfers) to 16 percent, 53. Quality of schooling is an important driver of so- as measured by the international $2.50-a-day poverty line. cial mobility but varies widely between urban and ru- A large number of exemptions and differentiated rates ral areas. According to the Second Regional Comparative (which were designed to boost the growth of priority sec- and Explanatory Study (SERGE), Paraguay ranks 12 out of tors) eroded the tax base. While low taxation has played 17 countries in Latin America in terms of student learn- a major role in attracting investment in the agriculture ing. Additionally, there are noticeable differences in per- sector that have fueled the country's export growth, the formance depending on location and level of the parent's lack of neutrality of the existing tax system creates artificial education. An urban child in a household with a wealthier profitability for its beneficiaries. socioeconomic background scores similarly to the aver- age Brazilian child on tests (Brazil was sixth among the 52. Strengthening public sector management, trans- countries studied), whereas a poor rural child is likely to parency and overall governance at all levels of GoP is score below the mean in any country in the study, includ- needed to improve efficiency of spending. Limited ca- ing the countries with the lowest performance levels (Do- pacity for planning, implementing and monitoring public minican Republic, Ecuador, and Guatemala). Designing investments is common in most ministries and national and enacting an education finance law to provide the ed- agencies, aggravated by low capacity of municipal gov- ucation system with the necessary resources, ensure basic ernments to enforce minimum standards of quality of ser- school inputs in all schools and distribute the resources vice delivery and monitor effectiveness. Effectively hold- on the basis of equity criteria is a priority policy. ing government accountable for service delivery and use of public funds is especially important to fight corruption, 54. Reducing gaps in access to basic health services especially at the local level. Improving public sector per- requires allocating more resources to poor areas and formance requires setting clear rules on how public funds in a more efficient way. This can be done through: (i) are allocated to the different parts of the country and in- strengthening the primary health care (PHG) network centivizing providers of services to deliver efficiently and in marginalized and rural areas; (ii) introducing out- with quality by rewarding performance and strengthen- put-based financing as mechanisms to transfer money to ing accountability to citizens, regional and local health councils and strengthen gover- an xlntoySuy(SRE,Prauyrns92oto nance of the whole health system; and (iii) using innova- 58. Improving small farm productivity and integrat- tive technology (e-health, e-medicine) to deliver or con- ing smaller agricultural producers into export value trol specific health services in remote areas. chains remain a challenge. Paraguay's strong economic performance has been driven by agricultural production 55. Setting up a comprehensive and efficient safety and exports by a sub-sector of capitalized entrepreneur- net system for the poor requires resources and reli- ial producers who are fully integrated into world markets. able information. Although there has been some initial Smaller producers and firms in the other sectors main- progress in establishing social assistance programs tar- tam low levels of productivity and have limited linkages geted to the poor and vulnerable groups (such as the con- to dynamic commercial markets. These low productivity ditional cash transfer program Tekopord and the non-con- levels and deficient market integration are also associated tributory pension program Adultos Mayores), they have with several factors including shortcomings in the busi- not been sufficiently efficient or broad in coverage to lift ness environment, poor use of technology, limited access a significant number of the extreme poor out of poverty. to extension and business services, and limited access to Improving targeting of these programs and having a sin- finance.This situation is compounded by weak public-pri- gle registry of beneficiaries of all conditional cash transfer vate dialogue and lack of inter-institutional coordination programs are two important steps to make progress. mechanisms which hamper the effectiveness of authori- ties' initiatives to foster integrative growth. 56. Fundamental challenges in the water and sanita- tion sectors are low coverage and inequality in service 59. Agriculture plays an important role in food secu- provision. Low coverage is evident in the provision of safe rity, particularly for smallholders that have less than water in rural areas (especially the poorest) and access to 10 hectares (almost 60 percent of total agricultural sanitary sewers and adequate treatment of discharge in producers in the country). There has been an acceler- the Asuncion metropolitan area. Addressing these chal- ated concentration of lands in large farms mainly within lenges involves investment in expansion of coverage and some of the most fertile regions in the country (i.e. Alto an effective policy of fees and subsidies to ensure satisfac- Parana, Canindeyu and Caaguazu). Rural land sale and tory operation and maintenance. rental markets appear to be transferring land to house- holds with higher productive capacity. However, cultiva- tion of more lucrative crops (e.g. soy) is correlated with higher land inequality and foreign ownership of land. 57. Sustaining high economic growth and continu- About 87 percent of soy, cattle, and export crops are pro- ing with the ongoing structural transformation will duced on large landholdings (over 100 hectares) with lim- require improving connectivity and reducing logistic ted or no spill-overs to smaller production units. costs as well as increasing the efficiency and reliabil- ity of value chains for Paraguay's exports. Paraguay 60. Paraguay's low levels of connectivity further ex- has benefited significantly from the commodity boom in acerbate exclusion. Transport is a critical component of the last decade as evidenced by its robust economic per- Paraguay's economy. Being landlocked makes it heavily formance. However, as the initial positive impact of the dependent on road and fluvial transport to connect with boom vanishes, existing structural challenges are becom- neighboring countries for its exports. The challenges go ing more constraining for Paraguay's rural development beyond the road network since other transport systems and export markets. Connectivity at regional and rural still fall short of desired standards. Paraguay scores low on level is poor and an obstacle for business development. the density of km of roads per country surface area (148 In addition, transport and logistics costs are high, under- km per 1000 km2 compared to 333 km per 1000 km2 for mining profitability of firms. While the country has moved lower-middle-income countries), but relatively well on towards modern agriculture with large scale firm based km of roads per 1000 persons (9km per 1000 inhabitants production, small firms and families are significantly lag- compared to 4.9 for lower-middle-income countries). The ging behind the transition. Problems and inefficiencies in road network is heavily concentrated in the south-east- production and export value chains are both leading to em part of the country, leaving the northwest poorly cost increases and weaknesses in capacity to respond to connected to the rest of the country and its neighbors. market demand. The significant shortfalls in the quality of the transport in- 9hisrmi hleg.Prga' togeooi frastructure add to this burden and contribute to volatile price formation. Drought induced delays in river transport cause local commodity prices to fall and local food prices to rise. Given its crucial role, it is therefore imperative to prevent the sector from becoming a binding constraint to integrative growth. 61. Unplanned urban sprawl is becoming a devel- opment challenge. The Gini coefficient in the urban area has been rising, possibly as a consequence of more people moving in search of wage earning opportunities. Many of the urban poor live in precarious settlements in risk-prone flood areas, with about two thirds of un- planned settlements in urban areas classified as poor. Furthermore, in Asuncion metropolitan area, it was esti- mated that there were about 150,000 homeless people in 2011 and that more than 800,000 families have some kind of deficit in housing. Only about 15 percent of them have access to sewerage and 75 percent or less have 24-hour water service. Transportation to and from work is becom- ing increasingly difficult, due to weak public transport in- frastructure and congestion.  WBG Partnership Strategy A. Gouernment Program which supports sustainable fiscal policies, enhanced tax and Medium-term Strategy revenue efforts, improved efficiency in social protection polices and targeting, and widened financial inclusion. 62. The GoP has prepared its first National Develop- ment Plan 2014-2030. The NDP's overall goals include 64. Pillar I - Poverty Reduction and Social Devel- a focus on eliminating extreme poverty and realizing a opment. The challenges faced by the extreme poor growth in incomes of the bottom 40 percent higher than and vulnerable would be addressed by providing equal average incomes. As such, the WBG's twin goals are well opportunities in health care, education sanitation and aligned with the NDP The Plan establishes an ambitious housing, and other social services. The actions under this agenda until 2018 which aims to create an inclusive soci- pillar include improved coverage and targeting of social ety with an innovative and productive private sector that protection schemes. The NDP proposes the rollout of an generates jobs and opportunities. The vision foresees an integrated information system to create a registry of ap- improved targeting of social safety nets to the vulnerable proximately 250,000 families in situation of vulnerability groups, and an economy linked to regional value chains, to be linked to social schemes and agricultural programs, and to the world. The NDP also establishes a monitoring including education and health services. system to track overall progress and, in particular, of the flagship program "Sembrando Oportunidades" -Sowing 65. Pillar 11 - Inclusive Economic Growth. Following Opportunities- which targets the rural poor.The NDP has successive years of strong economic growth, the role of been widely consulted with development partners, civil the Government is described as providing support to pro- society, private sector and local authorities. ductive processes, especially through public investments in services and infrastructure. This will enable access 63. The NDP is organized around three thematic pil- to markets and greater competitiveness. The NDP gives lars: (i) Poverty Reduction and Social Development,(ii) In- priority to funding infrastructure through Public Private clusive Economic Growth, and (iii) Insertion of Paraguay Partnerships (PPPs). Some particular targets under this into World Markets. The NDP includes four transversal pillar include upgrading logistics infrastructure (e.g, the themes: equal opportunity, efficiency and transparency, hidrovia), and the facilitation of market mechanisms to land management, and environmental sustainability. The mitigate the agricultural risks (i.e., creation of commodi- Plan is anchored in a medium term economic framework ties exchanges, agricultural or weather-related insurance prtcinshee.TeNP rpsste9olu fa and an increase in the number of certified companies engagement. Weak coordination has, in the past, nega- with recognized quality standards and safeguards). tively impacted portfolio performance and led to several knowledge products falling short of their potential policy 66. Pillar III - International Insertion of Paraguay.This impact. The experience of IFC, especially in supporting pillar calls for coordination efforts between Paraguay and the burgeoning agribusiness sector -working with local its key partners to expand trade and investment, as well banks on micro, small and medium enterprises (MSME) as to protect key environmental assets, such as the water- lending mechanisms- has been very effective, reaching shed of the Paraguay and Parana rivers. The insertion of close to 33,000 farmers. Given the important leadership Paraguay into the world economy also requires efficient role of the MoH and the STP in designing the NDP, a close public institutions that guarantee the rule of law and an coordination with both institutions as well as line minis- enabling environment for investors.The Plan spells out an ters is vital for effective program development and imple- ambitious regional agenda with Paraguay's neighbors to mentation. realize such investment. 70. The WBG will seek to streamline its engagement 67. The national budget is aligned with the NDR The and work closer with the Legislative Branch and other proposed government program includes a medium-term development partners. Lack of effective dialogue be- economic framework anchored in a credible and pre- tween the Executive and Legislative Branches about the dictable budget closely linked to the NDP. The GoP has intended plans and objectives of the IBRD loans was a earmarked fiscal resources, including from royalties from critical element in driving delays in obtaining the respec- the bi-national hydropower plants for social sectors, and tive legislative approvals (with an average delay of 8 to 9 external financing from international capital markets, months). The WBG will make a conscious effort to initiate direct foreign investment and multilateral financing to a structured dialogue with the Parliamentarians in the support the overall implementation of the NDP. The main Legislature and seekto provide the necessary information economic institutions leading these efforts are the Min- and details on WBG operations, procedures and issues of istry of Hacienda (MoH) and the Secretary of Technical specific interest to them.The proposed WBG program will Planning (STP) which have coordinated the preparation focus, throughout, on strengthening the capacity to man- of the NDP through a consultative process that involved age public resources (including WBG financed projects), all stakeholders in the country (the national, regional and improving good governance through social accountabil- local governments, civil society and development part- ity mechanisms and promoting transparent public man- ners). The NDP will be regularly monitored and reports agement. Better coordination with other development made available to the public at large. partners will be made to ensure more effective collabora- tion, either by creating dialogue spaces or by participat- B. Proposed WBG Engagement ing more actively in already established fora. 68. The proposed WBG engagement in Paraguay con- 71. Knowledge services should develop dissemina- sists of a portfolio of financial, knowledge and con- tion mechanisms fully integrated in the analytical pro- vening services focused on promoting shared pros- cess and aim to serve as a platform for policy dialogue perity and reducing poverty in a developmentally on issues identified in the result areas. During the sustainable manner. The CPS builds on lessons learned 2009-2014 period, the WBG delivered 31 Analytical and and outlines a program that further strengthens the col- Advisory Activities (AAAs) products that provided analysis laboration within the WBG and with other key develop- of public sector management, financial and private sector ment partners (for the lessons learned from the FY1 0-14 strengthening, economic policy, land management, edu- CPS Completion Report (CPSCR), please refer to Annex 2). cation reform, etc. While some analytical pieces were well received and had positive policy impacts (e.g. tax reform, SE reform) and informing dialogues on poverty (equi- ty assessment, volatility study), others have not had the desired impact and their public availability was limited. 69. Strengthening portfolio performance, increased This left an important body of analytical work under-used. selectivity and strategic focus are critical for the new Under the new CPS, the Government and the WBG have 9neddpasadojcie fteIR on a agreed to a joint analytical and advisory program, to be infrastructure and policy through a contingent DPL. The complemented by Reimbursable Advisory Services (RASs) investment support of the CPS focuses on the asset sup- and just-in-time policy notes on specific topics following ply of poor households, and includes specific targets of the pattern adopted by several MICs. Further, the WBG achieving synergies between the different IBRD financed will also promote increased South-South knowledge ex- operations and IFC programs which can support the GoP changes which will be valuable for all stakeholders. to create an operational platform to tackle poverty with- in the NDP. In developing a joint IBRD/IFC program, the 72. The Government and the WBG held consultations analytical and advisory services will be designed under a to support the formulation of this CPS. Meetings held coordinated and co-financed Paraguay Analytical and Ad- in Asuncion sought inputs from the international devel- visory Program (PAAP) to match the results areas and will opment community; key opinion leaders in the country; support the overall CPS objectives. Specific attention will representatives of the private and financial sector and be made on contributing to the efforts to address pov- civil society represented by organizations working on is- erty reduction and shared prosperity through the PAAP, sues of poverty, citizen participation, transparency, edu- particularly in the social sectors through targeted TA. cation and anti-corruption. Important topics covered and The Bank, as part of the CPS, is launching a focused ef- concerns raised included the importance for Paraguay to fort to improve project implementation performance, to strengthen the capacity of the public sector (particularly mitigate potential risks to the delivery of objectives. Ad- for implementing public investment programs), to focus justments will be made during the Performance Learning its development policies on the medium-to-longer-term, Review at the mid-point of CPS implementation. and to integrate environmental sustainability in an inclu- sive way in the development framework (see Annex 6 for 75. The proposed WBG Program is fully aligned with a more detailed description). the NDP and aims to contribute to its overall poverty and equity targets. Hence, the higher level objective of C. Proposed WBG Program this CPS is that of the NDP to reduce extreme poverty to 9 percent by 2018 and fostering income growth of the 73. The CPS applies several filters in identifying the bottom 40 percent, which is higher than the national objectives of its support. First, the seven objectives of average. More specifically, the proposed WBG program the CPS are linked to the twin goals of poverty reduction in this CPS is integrated into priority objectives within and shared prosperity.The program seeks to support Par- the NDP which it will support, given the WBG's current aguay to address longer-run developmental bottlenecks engagement and comparative advantage. Thus the pro- to sustained poverty reduction and improved equity, posed WBG program has selectively been built around while being cognizant of the past complex implementa- three results areas: (i) strengthening resilience to risks tion experience in the country. Second, the CPS objec- and volatility; (ii) boosting pro-poor delivery of public tives reflect the priorities of the government's NDP that goods and services; and (iii) fostering integrative mar- is focused on the sustainability of the growth patterns, kets. The results framework chosen for the CPS derives sharing the benefits of growth with the poor and near from the targets outlined in the NDP; and the WBG pro- poor, and increase the resilience to economic and nature gram results try to go, in most cases, beyond the individ- risks. Third, the WBG support is closely related to analyt- ual achievements ofa specific activityand will requirethe ical work and technical assistance (TA) in place which IBRD and IFC to work closely together in the programing provide a good understanding of the delivery chains and of its instruments. risks, and the coordination with other development part- ners. A tighter WBG coordination should also enhance Results Area 1: Strengthening delivery. Resilience to Risks and Vola tility 74. In addition, the CPS is selective by focusing on 76. Under the CPS, the WBG will continue to support fewer and larger operations and a sharper, co-fl- authorities' efforts to mitigate the costs associated nanced AAA program. Based on lessons from the past, with the vulnerability of the poor to exogenous risks. the WBG will limit the number but work towards larger First, efforts will focus on strengthening the ability of the operations. Attention during the first two years will be on households and producers -in particular the poor- to eryrdcin n hrdprseiytro9 h AP cope with price and climate shocks by furthering access outbreak of foot and mouth disease in September 2011 to financial services, enhancing agricultural risk manage- demonstrated the vulnerability of the sector. The cattle ment and promoting sustainable agricultural practices. industry was forced to slaughter some 1,000 animals to Second, efforts will focus on strengthening the public quell the outbreak and beef exports were banned for 80 finance management to help mitigate the impact of days. Furthermore, droughts and floods have produced growth volatility and enabling private sector investments. significant losses both in terms of agriculture export com- It will also advise on the implementation of the FRL that modities as well as for family farmers producing for local aims to help the government manage volatility and its im- markets, highlighting the urgent need for developing the pact on fiscal balances. By defining a ceiling for the overall market for risk transfer instruments, like agriculture insur- fiscal deficit and limitations on wage increases and pub- ance, to be able to smooth out incomes in light of natural lic primary current expenditures, it formally requires the disaster events. preparation of a medium term fiscal plan and will support a predictable fiscal policy to anchor private sector expec- tations and encourage investment. NDP 2030 Indicator: Reaching financial inclusion of 100 percent of households by 2030 NDP 2030 Indicator: WBG ResuLt Indicators: * Mitigate the costs of natural disasters caused by cli- * 50 percent of adults with sauings accounts by 2018 matic euents (2013 basetine: 29 percent) -disaggregated by gen- der WBG ResuLt Indicators: * 163,000 indiuiduats and microenterprises accessed * Agricultural insurance penetration rate increased to micropnance client seruices by 2018 (2012 base- by 15 percent by 2018 (2013 Baseline: 0.39 percent) line: 125,000) - will be measured disaggregated by gender in 7 percent of farmers with improued access to mar- 2018. kets and access to enhanced productiuity and fi- nanciat seruices by 2018 (2013 baseline: 5 percent) 77. The WBG will support the development of an in- tegrated agricultural risk management program that 78. The WBG will continue to support efforts to will help promote more equitable sustainable growth. broaden and deepen Paraguay's financial sector and Improved agricultural risk management is imperative promote sound and responsible financial inclusion. given the weight of agriculture in the country's econo- The development of inclusive and efficient financial mar- my as well as the potentially large impact of increased kets will help poor households improve their livelihoods agricultural volatility on the low income segments of and small businesses grow by enabling them to save, the population. The WBG's support will come from tech- invest and cope with economic uncertainties. The WBG nical assistance and through the Proyecto de Desarrollo assistance combines advisory services, policy-based lend- Rural Sostenible (Sustainable Rural Development Project ing, and investment lending. Ongoing advisory services - PRODERS). Ongoing technical assistance provides sup- will continue to support the design and implementation port to the development of: (i) improved sanitary and of a comprehensive National Financial Inclusion Strategy, phytosanitary legislation, (ii) design of agricultural insur- coordinating and leveraging efforts from public and pri- ance schemes for small farmers (increasing the insurance vate stakeholders as well as the donor community. The penetration rate measured as the volume of insurance related institutional and regulatory reform agenda will be premiums over agricultural GDP), (iii) better price forma- supported by a DPL. IFC will continue to support the fi- tion through the introduction of a formal commodities nancial sector development and financial inclusion agen- exchange, and (iv) increased access to information on da through ongoing investment operations, which could weather. PRODERS will support the development and be strengthened through targeted advisory assistance to deployment of an information system that will facilitate government and the key financial institutions to ensure rapid response to emerging animal health issues. The the availability of financial services to more citizens and 9ie 2500 MSMEs. IFC's business operations in financial markets since FY13 are cumulatively expected to increase access to financial services for about 17,500 SME clients and 163,000 microfinance clients, most of them in rural areas NDP Indicator: and agribusiness. Improuement in the tax/GDP ratio to 18 percent by 2030 WBG Result Indicators: .Total toxlGDP ratio increased from 11.5 percent NDP 2030 Indicator: (2013) to 14 percent (2018) and the progressiuity of Reduce togero the illegal deforestation rate the tax system improued compared to the base year 2013 WBG Result Indicators: Progressiuity of expenditures in sociat and inra- Improued forest management and conseruation structure seruice deliuery improued by 2018 com- practices introduced on an area equiualent to 18 pared to baseline in 2013 percent of the current Alto Parand Atlantic Forest area23 by 2018 (Baseline 2014: 9 percent) 81. A core result of the WBGs program during the CPS will be to support Government in raising the level 79. The WBG program assistance to the environmen- and improving the incidence of taxation. Although Par- tal sector focuses on institutional strengthening and aguay has undergone a thorough fiscal reform program forest land conservation. Rapid environmental degra- since 2002, there remains an unfinished agenda to further dation weakens the contribution of Paraguay's natural raise fiscal revenues, render fiscal policy more progres- resources wealth to growth. Technical assistance on insti- sive, and increase spending on priority social programs tutional strengthening will focus on environmental com- where expenditures are low and outcomes remain weak. pliance of sector agencies, such as the Secretary for the Environment in issuing water extraction licenses or the 82. The Government has taken initial steps to simul- Ministry of Public Works in managing wastes produced taneously enhance its ability to collect tax revenues by road construction. The WBG program continues to andtomakethesystemmoreneutralforconsumption conserve the Atlantic Forest located in Paraguay through and investment decisions. The Bank will continue pro- the introduction of sustainable forestry and land manage- viding support for expanding the tax base and reducing ment practices that reducing emissions from deforesta- regressive taxes as well as strengthening institutional ca- tion and forest degradation. pacity of the Tax Administration. The WBG is supporting the Government's efforts to improve public spending ef- ficiency through its advisory services, The proposed DPL/ DDO will support i) increasing the value added tax (VAT) rate applied to the financial sector from 5 percent to the 80. During the CPS period, the WBG will focus on the standard rate of 10 percent; (ii) defining the VAT collection pro-poor delivery of public goods and services. This base for the agriculture sector and establishing a 5 per- includes support for efforts to raise revenue collection, cent rate to this tax base; (iii) replacing the existing agri- make both taxing and spending more pro-poor, deliver- cultural income tax with a new Tax on Agriculture Income ing quality services to the poor, and improving the ac- (Corporate tax for agricultural activities - IRAGRO) to fix countability and transparency of public spending for the the loopholes in the system. Estimates are that these ef- poor. The existing IBRD investment portfolio, a new DPL forts will increase the ratio of tax collection to GDP and project, as well as analytical and advisory services, includ- reduce the burden on the bottom 40 percent. ing the PAAP, would support the achievement of these results. 83. The WBG will also provide technical assistance -under the PAAP- to the STP on the overall monitor- 23 Total current area of Alto Parani's Atlantic Forest is 1,702,000 ing and evaluation of the NDP as well as on the devel- hectares. Source WWF, 20014, www wforg.py/lue haceos bosqueatlantico/. of p l spending for the por Teeisig BDinetmn orfli,ane9P assistance would be geared to (i) monitor progress to- phasis on their operation and maintenance to increase wards overall poverty and inequality targets in Paraguay, sustainability.The ongoing energy operation aims to in- including analysis as to the main drivers of poverty dy- prove the reliability and quality of electricity throughout namics; (ii) develop an overall framework for executing the country. and monitoring the implementation of the NDP, and exe- cuting it; (iii) update the targeting instruments of several 85. In addition the WBG program will pay specific at- programs aiming to reach the most vulnerable groups, tention to institution building activities designed to including the conditional cash transfer program Teko- improve delivery of quality services through resourc- pord and the non-contributory pension program for the es planning and management. The ongoing roads proj- elderly Adultos Mayores; and (iv) support the design and ect helps the Ministry of Public Works and Communica- implementation of a single registry of beneficiaries of all tions (MOPQ prioritizing road maintenance activities. The social programs, which constitutes a necessary pillar for water and sanitation project focuses on improved man- an inclusive, transparent and efficient social protection agement of the water utility. The agricultural program system. For the latter, the WBG will facilitate South-South supports community organization development and ca- knowledge exchanges. pacity building. The energy project supports institutional strengthening to improve managerial decision making. NDP 2030 Indicator: Uniuersalig8tion of access to potabhe water and im- NDP 2030 Indicator: proued sanitation (currently 85 percent and 79 per- t Ensuring the transparency of public expenditures at cent) all three euels of the Gouernment and in all three democratic powers WBG ResuLt Indicators: * 10 percent of urban extreme poor in Asunci6n met- WBG Result Indicators: ropotitan area benefiting from improued enuiron- MOpen Inrormation Loaum4 fulty imptemented by at mental sanitation by 2018 (2014 Baseline: 0) -dis- lanst 20 percent of gouernment agencies by 2018 aggregated by gender (2014 basetine: 9 percent) * Indigenous peoples with access to sustainable wa- At least 10 new education sector information tools ter increased from 2.5 percent (2013) to 6.5 percent and 15 dtasets ouaiovbe for internalo management (2018) - disaggregated by gender and public access by 2018 (2014 baseline: 0) * At least two social accountability mechanisms un- 84. The WBG will maintain its engagement on pro- der the Open Gouernment initiatiue are successfully viding improved access to and better quality of basic implemented by independent CSOs by 2018 (2014 services for the rural poor, emphasizing the provision baseline: 0) of improved water and sanitation. Three ongoing IBRD programs and a grant-funded project will work on better- 86. The WBG will support the GoP in its open gov- ing basic services to the poor, largely but not exclusively ement and transparency agenda that includes en- based on geographic targeting to the poorest districts. abling greater civic engagement (easing public ac- The largest (including a recently approved additional fi- cess to relevant information on government budgets, nancing) of these operations is the integrated rural de- budgetary processes, norms of service, and service velopment program PRODERS that focuses on commu- performance data). Except for the ongoing energy pro- nity-based delivery of basic infrastructure services in the gram, all IBRD ongoing and planned investment program poorest districts of the country. The Biodiversity Project include social auditing that enables citizens to provide supports demand based provision of basic infrastructure structured feedback to public sector on the quality of ser- to poor indigenous communities. Ongoing investments in water and sanitation support access to sustainable 24 The Open Information Law (Ley5189/2014) makes mandatory water systems in indigenous communities, with an em- the publication of salaries and allowances received by the civil ser- vice. veomn9rga RDRSta oue ncmu vices delivery. In PRODERS and the Biodiversity Project, and better accountability and overall governance. Finally, this includes opportunities for communities to identify the WBG will provide technical assistance to help the Mi- and prioritize the assistance they receive to address their istry of Education prepare sound proposals to be financed development needs. In the Water and Sanitation Project, by FONACIDE. this includes the development of "citizen's commitment charters" between the communities and the state-owned Results Area 3: Fostering Market water and sanitation utility. This social watch mechanism Integration tracks standards and improvements, including reports on service providers and the quality of services. It provides 88. The WBG aims to support Paraguay in fostering for complaints mechanisms and establishes rights and market integration to create better opportunities for obligations for users. Importantly, the WBG has been in- smallholder farmers to participate in markets and for vited in by the Government to work with the Tekopord overall connectivity to improve. This will be achieved conditional cash transfer program to develop a model through a comprehensive program that increases pro- for civil society-government partnership for more trans- ductivity of the small farmers complemented by interven- parent and accountable implementation of the program. tions that decrease the time and cost of access to markets Further, all AAA activities under the PAAP will include an as well as leverages private sector knowledge and capital actionable - or content - social accountability angle. to improve connectivity and reduce logistics costs. Com- plementary support to a dynamic and rapidly growing 87. As part of the CPS, a special attention will be giv- private sector will include advisory services to promote en to provide technical assistance to the Ministry of improved access to business services, technology and fi- Education to strengthen four policies that are critical nance to link producers to emerging value chains. to improving the transparency, accountability and effectiveness of the education system. First, it will sup- port a thorough review of education financing and the development of alternative resource-al location options for basic school inputs, which are currently regressive and distribute more resources to areas that have better NDP 2030 Indicator: endowments. This is geared to prepare the grounds for imReducing to less than 3 percent the productiuity an Education Finance Law which would regulate all pub- gap of land use between fomily farming and cam- lic resources allocations, including the Fonda Nacional de mercial farming Inversi6n Ptoblic y Desarrllo (National Public Investment and Development Fund - FONACIDE), determining in a WBG ResuLt Indicators: clearand transpa rntwaythe responsibilityofeducation Income of 15 percent of poor households (out of authorities at all levels: national, departmental, municipal 130,000) in Concepci6n, San Pedro, Cnindey, and in the schools. Second, it will focus on identifying the Cooguo,6 and Coo,5pd increased by 30 percent by policy levers to improve efficiency and quality of service 2018 (2013 Baseline: annual income is G4 million) delivery. Special attention will be paid on revising policies disaggregated by gender to improve quality of teaching, which have been found 130 additional indigenous communities' (represent- in Paraguay and elsewhere to be the most important de- ing more than 50 percent of Indigenous Peoples terminant of the effectiveness of an education system.25 in Paraguay) economic deueopment improued Pre-service teacher professional development, in-service through enhancement of orgtnihetionot capacity teacher training and evaluation of teachers are going to and better quality iuing conditions by 2018 (2014 be the initial areas of focus. Third, the WBG would support baseline: 45 communities) disaggregated by gender strengthening the education information system to pro- vide the mechanisms for evidence-based policy making 89. The WBG will pilot support for smallholder farm- ers to increase technical knowledge and to access 25 World Bank (2013b) "Estado del arte de la profesi6n docente en Paraguay. Ideas inspiradoras para la elaboraci6n de poilticas educati- vas"Bruns and Luque (forthcoming)"Better Teachers for Latin Ameri- nancing from PRODERS will improve the socio-economic ca and the Caribbean New Evidence on How to Raise Teacher Quality conditions of small-scale farmers and indigenous com- and Student Learningfm WB esl Idca9s munities through increasing the number of extension the Development Bank of Latin America (CAF), the Japan agents and providing farmers with access to inputs while International Cooperation Agency (JICA) and the WBG to linking them to value chains. The project is designed to improve road infrastructure and connectivity in the poor- increase the incomes of 25,500 small-holder farmers by est parts of the country through investments in feeder 30 percent by 2018 and recent simulations suggest this and trunk roads. The WBG will continue working on crit- may help lift an additional 125,000 people out of poverty. ical components such as rehabilitation of trunk roads in IFC's trade finance program with five Paraguayan banking selected corridors in the poorest districts, institutional institutions worth US$110 million has guaranteed over strengthening to improve asset maintenance and the US$450 million in trade flows, primarily related to fertiliz- launching of a road safety program designed to address ers, agricultural machinery, agricultural commodities, and the rapidly increasing public health crisis associated with leather and meat. Looking ahead, IFC intends to further road accidents and fatalities. Under the CPS, the WBG will expand this collaboration by strengthening the country's finance a share of the ambitious investment plans in ru- agricultural sector and small-scale farmers, aiming to in- ral roads through existing and potentially new financing crease or improve sustainable farming opportunities for commitments. close to 11,000 farmers. The WBG will work with govern- ment on scaling-up these pilot interventions and will re- 91. Technical assistance will help Paraguay identify visit the broader impact during the progress report. The logistics bottlenecks and ways of addressing them. results indicators are based on household surveys which Improving competitiveness and bringing down the costs include gender related questions, such as if the head of of doing business in Paraguay requires addressing the household is a woman, among many others. infrastructure gap, particularly in the transport sector. Ongoing TA27 on the costs of transporting export com- modities from the farm to the market reveals that logis- tics costs are currently estimated to be half of the freight on board cost of delivering grain to port in Asuncion. Par- ticularly telling is that road congestion in Asuncion, both NDP 2030 Indicator: access to the metropolitan area and to the port terminals, * Consolidation of an efficient and effective transport represents 25 to 30 percent of the inland transport from network that reduces logistics costs to internation- the farm to gateway port.This TA will help identify logisti- ally competitive levels cal bottlenecks and set priorities for investment. WBG Result Indicators: 92. The Government has identified public private * At least two public priuate partnership transactions partnerships (PPPs) as one of the instruments they in transport/logistics by 2018 (2014 baseline: 0). will use to close the infrastructure gap while bring- * Travel time on two 200 km segments of roads in se- ing innovation and efficiency to infrastructure asset lected priority Departments (San Pedro, Coogua56 management. As IBRD, IFC is engaged in infrastructure and Coa3apd, or similar) reduced by at least 30 and service investments to enhance the competitive ad- minutes by 2018 (Baseline 2014: average travel vantage of Paraguay's agribusiness sector through key time for a 200 km segment of a national road is 3 infrastructure investments. IFCs support to barge trans- hours and 20 minutes)26 port operators in the hidrovia covers about 30 percent of the country's soy production and 40 percent of fuel trans- 90. The WBG prioritizes, jointly with other develop- port. Over the next CPS period, IFC is keen to expand its ment partners, supporting Paraguay in raising the financing of critical infrastructure investments, including connectivity and integration of isolated rural com- direct investments and advising the GoP on the structur- munities. Paraguay has launched a large program in- ing of PPP projects. The focus of the WBGs assistance in volving the Inter-American Development Bank (IADB), this area is to strengthening the Government's program through the development of institutional capacity as well 26 Measured by using the Moving Car Observer Methodology as financing options for key infrastructure assets such as http://www.researchgate.net/publication/265163097_Application roads, airports and the hidrovfa. of Moving_Car_Observer_Method_for_Measuring_Free_Flow_ Speed-onjfwo-lane-Highways 27 World Bank. Draft Farm to Market Study. 2014. 9iluet ls h nrsrcuegpwiebig IBRD Portfolio FY10-14 FiscaL year 2009 2010 2011 2012 2013 2014 2015 Net Commitment Amount 317.5 175.5 275.5 375.5 275.5 375.5 375.5 # Problem Projects 3 0 3 3 3 2 1 % Potential 16.7 66.7 0.0 40.0 25.0 50.0 50.0 # Projects at Risk 4 2 3 5 4 4 3 % Commitment at Risk 48.3 57.8 63.7 100.0 100.0 100.0 73.4 % Problem Projects 50 0 75 60 75 50 25 % Proactiuity 100 33 0 33 75 Tot Undisbursed BoLance 183 170.5 258.3 236.9 216.4 269.1 265.2 Tot Disbursed in FY (No DPLs) 5.8 2.2 12.2 21.5 20.5 47.2 3.9 Disbursement Ratio 4.7% 1.2% 7.2% 8.3% 8.6% 21.8% 1.5% Source: World Bank. IFC portfolio (FY10-FY14) IFC Variable FY10 FY11 FY12 FY13 FY14 Commitments $m 101.6 217.7 145.0 116.5 203.6 MobiliZation $m - 20.0 11.8 3.0 20.0 Own account + Mob $m 101.6 237.7 156.8 119.4 223.6 PortfoLio (net commitments $m) 134.2 260.8 234.3 212.2 291.8 Outstanding portfolio (exposure $m) 97.0 169.8 203.4 179.3 191.1 DOTS Deuelopment Outcome (% successful) None Reported None Reported 100% 67% 100% Source: IFC. D. Implementing the FY15-18 94. Total current IBRD exposure to Paraguay is Country Partnership Strategy US$352.2 million with FY14 disbursement totaling US$47.2 million. The active portfolio consists of 4 IBRID 93. The overall WBG financial support is expected to loans for a total of US$375 million - US$265.2 million re- be in the range of US$900 million to US$1,100 million mains undisbursed (See Table 2). The Bank also manages during the CPS period. This includes an indicative IBRD a portfolio of 10 trust funds (of which one GEF project) program of about US$600 - US$700 million as well as ex- for a total of US$5.6 million. Only two of these are Bank pected IFC financing for the private sector in the range administered Trust Funds (TFs). The disbursement rate of US$300 - US$400 million, assuming appropriate market for FY14 was 21.8 percent, a strong increase from FY13 conditions. The Multilateral Investment Guarantee Agen- 8.64 percent. cy (MIGA) will also play a role to facilitate and broaden the involvement of foreign private investments within PPP 95. With a portfolio of US$ 292 million 1FC supports initiatives by providing political and credit risk insurances the development of a competitive private sector to foreign investors. The actual volume of IBRD lending with a special focus on ensuring regional integration will depend on how program performance evolves in the through trade. In particular, IFC concentrates on sup- course of the CPS period, continued government interest porting the development of the agriculture market; (ii) in IBRD financing, and on IBRD's lending capacity and de- enhancing and sustaining economic growth and trade mand from other borrowers, by improving transport services, infrastructure and com- lon o otlo S35milo S25.9ilo e munication networks; and (iii) strengthening the financial the choice of policy actions and evaluation of their rele- system and providing access to finance to SMEs. vance and political feasibility. More specifically expertise in the specificities and challenges of the country is essen- 96. The WBG program performance during the FY10- tial for a proper assessment of the support for reforms 14 CPS was rated moderately unsatisfactory. As the across constituencies and gauging of political risk. Sus- results under the new strategy will be largely influenced tamed engagement on the part of the Bank is also con- by the ongoing portfolio the team has taken into consid- sidered critical for supporting reform processes over the eration the lessons learned (see Annex 2) in the design of medium term. the proposed approach. The successful IFC engagement provides an excellent opportunity for IBRD-IFC synergies 99. ImplementingthestrategytheWBGwill keep dif- and joint activities under the new CPS and cooperation ferent levels of engagement, starting with the twice- will be furthered under the new engagement areas. a-year portfolio reviews that involve the MoH, the line ministries, and the WBG teams and management. In 97. Close supervision and implementation support addition, some innovations already in place, such as the need to be strengthened further under the new CPS. use of e-disbursement on a pilot basis with the GEF Par- The IBRD program has faced important challenges, par- aguay Biodiversity project could be extended to other ticularly in the implementation of Investment Project Fi- projects. All portfolio procurement plans are now pub- nancing (IPF), which will continue to be addressed during lished on the Procurement Plan Execution System (SEPA the new CPS. Implementation of the four active IPF oper- - www.iniciativasepa.org) which brings public disclosure ations (in agriculture, energy, roads, and water and san- to past and future procurement actions. Additionally, the itation) has experienced significant challenges starting Implementation Status and Results Reports (ISRs) are now with major delays in becoming effective. The effective- translated in Spanish and made available to upload on ness delays of the projects coupled with rather complex the clients' official websites. design and safeguards arrangements, involving several institutions and high staff turnover (partially due to the 100. Mainstreaming gender in the WBG. The WBG will political crisis in 2012) have impacted the overall portfolio continue to mainstream gender issues both in lending execution. While disbursements picked up in FY14 with a and non-lending activities, and the gender disaggregat- disbursement ratio of 21 percent, the challenge is how to ed indicatorswill updated bythetimeofthe Performance sustain this pace during the new CPS period. Going for- Learning Review. It will introduce the SWIFT (Survey on ward, the WBG will provide close implementation support Well-being via Instant and Frequent Tracking) monitoring including regular portfolio performance reviews and, for system for every new operation to track disaggregated new engagements, use simpler project design avoiding data and monitor potential differences in impact on men schemes with several implementing agencies to reduce and women. SWIFT's survey will register the respondent's coordination demands. and all household members'gender for statistical purpos- es. In addition, the SWIFT team, in collaboration with the 98. While Development Policy Loans (DPLs) suffered WBG Gender Team, will consider additional gender-spe- from similar effectiveness delays, their implemen- cific questions pertaining to, inter alia, domestic violence, tation has been more successful in supporting criti- employment opportunities and access to social services, cal public sector reforms. Effectiveness delays did not which might be relevant for a more comprehensive un- have a major impact on the achievement of results of derstanding of these issues (for more detail see Annex the DPL operations given that they focus on policy and 10). institutional actions that are completed prior to the op- eration becoming effective. DPLs have focused on public 101. The Bank will continue its support for further sector management using the rich analysis from years developing the country systems. The country Public of economic and sector work. The lessons learned from Financial Management (PFM) system has not been fully designing DPLs in Paraguay underscore the importance utilized in the implementation of the IBRD Paraguay port- of national ownership of reform actions and striking the folio due to a number of issues including: (i) complicat- right balance between political feasibility and depth of ed flow of funds procedures; (ii) lack of skilled staff and reforms. A strong knowledge background is essential for high personnel turnover in the implementing agencies; 9iee rtclfrspotn eompoessoe h and (iii) the need for an upgrade of the accounting mod- GoP more accountable. Ongoing IBRD operations have ule of the Sistema de Contabilidad (Integrated Financial a mechanism for social accountability, and through the Management System - SICO) at the government level. In GPSA grant, a group of CSOs will audit social spending recent years some progress has been made with the in- in the Tekopord program and related social protection troduction of budget commitments, development of the networks. All IBRD and GEF operations will apply SWIFT Modelo Estdndarde Controllnterno delParaguay (Standard to monitor progress in their impact on poverty reduction Model of Internal Control Manual - MECIP). Nevertheless, and shared prosperity indicators, and with the inclusion challenges remain and particular attention will be paid to of gender specific impacts. strengthening internal controls and building institutional capacity of the internal audit function to facilitate transi- 104. Partnerships and Coordination. Development tioning to use of country systems. partners are mostly engaged in strengthening commer- cial and international trade ties, and the specialized finan- 102. Procurement strengthening will be furthered un- cial support is provided by multilaterals, such as the IADB, der the CPS with the goal of preparing the transition the CAF and the European Union (EU). In the governance to use of the country's procurement systems. The Bank agenda, the WBG also works closely with lead of the Unit- is supporting the Direcci6n Nacional de Compros PObli- ed States Agency for International Development (USAID). cas (National Procurement Office - DNCP) to strengthen The WBG is particularly focused on the poverty reduc- their Public Procurement System. The pilot program us- tion agenda, at the request of the GoP, and with the lead ing reverse auction system for shopping of goods (up of the MoH and STP in the Social Cabinet, coordination to US$50,000) in Bank-financed projects has closed with meetings are being organized since 2014 to disseminate promising results. Significant savings were obtained and the NDP (see Annex 4 for a more detailed description the the Bank is looking into extending it up to National Coi- main programs in Paraguay). The process of harmonizing petitive Bidding thresholds. In addition, DNCP has taken development partners in Paraguay has had different ar- the first steps in the "framework contracts" method. The rangements through time and the WBG would continue Bank is closely monitoring the development of this ini- to facilitate that dialogue, such as during the consulta- tiative with the possibility to gradually incorporate this tions during the CPS (see Annex 6 on more details from method in Bank-financed projects. In addition the Bank the consultations with stakeholders). has started to work with DNCP to provide technical as- sistance and support: (i) DNCP system re-engineering (e-procurement); (ii) digital signature certification; (iii) open contracting; (iv) complaint system; and (v) internal management system for the Unidades Operativas de Con- trataciones (Decentralized Public Procurement Agencies -UOC). The benefits of this support and assistance would have an impact not only on Bank's financed Projects, but also on the whole Paraguayan public investment system. 103. The CPS will continue to support the Open Gov- ernment and Open Data initiatives agenda articulated in the NDt The initiatives aim to increase public sector transparency and improve social accountability mech- anisms. The GoP issued its second Open Government 2014-2016 Action Plan in July 2014, following President Ca rtes'declaration of thato"what is public shall be publicic The NDP endorsed an international social accountability initiative under the Global Partnership for Social Account- ability (GPSA) in which Paraguay was among eight coun- tries selected to enhance citizen engagement to facilitate the dissemination of public information, and make the manporasi aaga)Teprcs fhamnzn  Managing Risks 105. The outcomes targeted by this CPS are subject to mainly commodities, reductions in the demand of region- various economic and political risks as well as risks relat- al partners can be compensated in other international ed to institutional capacity and program implementation. markets, albeit with a lag. Adverse shocks to the Para- Overall risk is rated as "substantial" with several risk cate- guayan economy are likely to have adverse impacts on gories described in more details below. government revenues and the ability of the Government to provide public services and investment. 106. Economic risks. The main risk in Paraguay is the economic management of volatility derived from agri- 107. Institutional capacity and implementation risk. culture. Paraguay's economic growth has become more Public sector capacity constraints are considerable in volatile in recent years which stems from external shocks Paraguay and constitute a major challenge to successful and shocks to an agricultural sector, whose weight within budget execution, completion of key investment proj- the overall economy has grown in recent decades. Volatil- ects and implementation of reform programs. The limited ity has wide-ranging impacts on the economy, including number of technical staff in core ministries and project productive sector performance, tax revenue, and on pov- implementation units poses implementation risks. Invest- erty and equality rates. Particularly, poor people working ment projects supported both under the government in agriculture are exposed to sharp swings in activity and budget and by international financial institutions suffer thereby in their incomes. Volatility also renders planning from long years of slow implementation with major cost and forecasting more difficult for macroeconomic man- increases in the overall value of the projects. The Govern- agement. A related risk is the exposure of Paraguay to ex- ment's ambitious agenda for attracting large infrastruc- ternal shocks due to limited diversification of its product ture investments through PPPs may not materialize due base and trading partners. Paraguay remains highly vul- to weak investment programming capacity and regulato- nerable to regional and global economic fluctuations and ry risks. There are also limitations in the assessment and to weather-related shocks. In particular, the slowdown in mitigation of social and environmental risks, which may Paraguay's main trade partners, Argentina and Brazil, may result in excessive delays in the implementation of in- negatively affect demand for Paraguayan exports. Anoth- frastructure projects. In addition weak inter-institutional er challenge is linked to the limited fiscal resources that coordination could put the success of the Government's constrain spending on human development and growth reform program at risk. However, the Government's NDP enhancing policies. However, as the country's exports are aims at increasing inter-institutional coordination and es- makt,abetwt lg desesok9o h aa tablishing Monitoring and Evaluation (M&E) mechanisms for achieving results on time. The WBG will continue sup- porting the MoH and other line ministries to build fidu- ciary capacity for better management public investments. The Bank also supports institutional capacity through its non-lending TA for strengthening Tax Administration and SOEs'corporate governance structure. 108. Governance risks and corruption. Paraguay ranks very low in good governance indicators, such as the perception of corruption measured by Transparency In- ternational which places Paraguay in the 150th place out of 177 countries.28 Tackling corruption and improv- ing governance is more than a short-term development goal. Importantly, the Government is pursuing a number of important initiatives, including the dissemination of public information through public websites, using feed- back hotlines for public procurement and discussing in the Legislative Branch a public information law. The WBG will continue supporting initiatives aligned with the open government agenda of the NDP and providing fiducia- ry support to implementation units in line ministries. The WBG will also be supporting social accountability schemes from independent civil society organizations under a grant from the GPSA. 109. Political Risks: The Paraguayan political system elects the President and the members of the Legislative Branch for a period of five years simultaneously. Presi- dent Cartes currently enjoys a majority in the Legislative Branch. Nevertheless, Paraguayan political dynamics does not always imply an alignment between the govern- ing party and its Legislature representatives. Therefore, ensuring the support from the Legislative Branch for the approval of IBRD loans is a key issue that needs to be dealt in a one-by-one basis. The election of mayors will take place in 2015 and it can potentially influence the political scene. However, the WBG program is focused on poverty reduction and shared prosperity, an area which is a pri- ority across the political spectrum. The WBG will make a special effort to reach different parties in the Legislative Branch to better explain the scope and priorities of the WBG program in Paraguay. 28 http://www.transparency.org/cpi201 3/results ANEE ANNEX 1 Results Framework - Paraguay Country Partnership Strategy FY15-18 Results Area National DeueLopment Expected CPS Outcomes/ Key WBG Activities PLan/ WBG ResuLt Indicators (FY15/16) Indicators 1. Strengthen- GoP aims to strength- #1.1 Enhanced agricuL- AgriculturaL insur- Financial seruices: ing ResiLience en pubLic institutions turaL risk management ance penetration rate Ongoing: to Risks and to help mitigate the increased 15 percent by -PRODERS VoLatility impact of growth WBG wiLL support the 2018 (2013 BaseLine: uoLatiLity and enabLe deuelopment of an 0.39 percent) Knowledge seruices: priuate sector inuest- integrated agricuLturaL - Indicator will include Ongoing: ment, in particular to risk-monagement pro- gender dimension. - Farm to Market study protect the poor gram to promote more Proposed: equitabLe and sustain- - Programmatic Agricul- abLe growth tural Risk Management NDP 2030 target: (portLy under PAAP) Mitigate the costs of natural disasters caused by climatic euents GoP plans to assist in #1.2 Improued inancial 50 percent of adults Financial seruices: deueLoping inclusiue inclusion with sauings accounts Ongoing: and efficient inanciaL by 2018 (2013 baseLine: - SME and Agribusiness markets which are WBG wiLL support the 29 percent). competitiueness (lFC) criticaL in helping poor deuelopment of a com- - Indicator is gender Proposed: households improue prehensiue NationaL disaggregoted. - lFCs business operations their LiueLihoods and Financial Inclusion in nanciaL markets and smaLL businesses grow Strategy in coordina- 163,000 indiuiduals the creation of the coLLater- by enabLing them to tion with public and and microenterprises aL registry saue, inuest and cope priuate stakeholders accessed to micron- with economic uncer- and the international nance client seruices Knowledge seruices: tainties deuelopment commu- by 2018 (2012 baseLine: Proposed nity 125,000) - Programmatic Financial NDP 2030 target: sector incLusion deueLop- Reaching financial in- 7 percent of farmers ment (partLy under PAAP) clusion of 100 percent with improued access - Farm to Market study of households by 2030 to markets and access to enhanced produc- tiuity and financial seruices by 2018 (2013 baseLine: 5 percent) Paraguay has one of #1.3 Improued enuiron- Improued forest Financial services: the highest deforesta- mentaL management management and Ongoing: tion rates in the world conseruation practices -PRODERS and wants to introduce introduced on an area - Gonseruation of Biodiuer- sustainabLe forestry equiuaLent to 18 per- sity and sustainabLe Land and Land management cent of the current Alto management. (GEF) to reduce deforestation Paran6 Atlantic Forest and forest degradation area by 2018 (BaseLine Knowledge seruices: = 9 percent) Proposed NDP 2030 target: - Programmatic Agricul- Reduce to Sero the ille- turaL Risk Management gal deforestation rate (partLy under PAAP) - Technical Assistance on Extractiues (partly under PAAP) 9iaca evcs ResuLts Area NationaL Deuetopment Expected CPS Outcomes/ Key WBG Activities PLon/ WBG ResuLt Indicators (FY15/16) Indicators 2. Boosting Pro- The current tax struc- # 2.1 Increased Reue- TotaL tax/GDP ratio Financial seruices: poor Deliuery ture is regressive and nues and Progressiuity increased from 115 Proposed. of Public Goods the GoP wiLL seek to of FiscaL Management percent (2013) to 14 - DPL-DDO and Seruice bring additional pro- percent (2018) and the gressiuity to the most WBG will suppart GoP progressiuity of the Knowledge services: regressiue tax system in raising the tax LeueL, tax system improved - Under PAAP (TBC) in LAC improuing the distribu- campared to the base Ongoing: tionaoftaxes andauver- year 2013 - TA for Tekopord and NDP 2030 target: aLL Me E of the NDP AduLtos Mores programs Improvement in the Progressiuity of expen- Proposed: tax/GDP ratio to 18 ditures in social and - Programmatic Equity and percent by 2030 infrastructure seruice Pouerty (uolatiLity, pro- deLiuery improed poor scal policy, ME, by 2018 compared to partLy under PAAP baseLine in 2013 - South-South Cooperation NDP aims to increase # 2.2 Improued access 10 percent of urban Financial seruices: access to basic service to quaLity pubLic ser- extreme poor in Ongoing: to the most under- uices for the poor Asunci6n metropolitan - Water e Sanitation served communities area benefting from project The WBG supports improued enuironmen- - Rural. roads project NDP 2030 target: incLusion through taL sanitation by 2018 -PRODERS - Uniuersalijation improued access to and (2014 BaseLine: 0) - Energy project of access to potable better quaLity of ser- - Indicator is gender Proposed water and improved uices to the rural poor disaggregated - DPL-DDO sanitation (currently 85 - Rural roads IPF percent and 79 percent, Indigenous peopLes respectiuely) with access to sustain- Knowledge services: abLe water increased Proposed from 2.5 percent (2013) - TA- Targeting support to to 6.5 percent (2018) Sembrando Oportunidladles - Indicator is gender - Programmatic Agricul.- disaggregated ture risk management and enuironmentaL protection (partLy under PAAP) NDP has effcient and #t2.3 Improued social. Open Information Financial services: transparent pubLic accountabiLity and Law"9 fully imple- Ongoing: sector management as transparency mented by Least 20 -PRODERS one of its main strate- percent of goernment - Water e Sanitation gic trusts The gouernment agencies by 2018 (2014 project increased transparency baseLine: 9 percent) - RuraL roads project NDP 2020 target: and accountabiLity of Proposed: - Ensuring the transpar- its budget. The WBG At Least 10 new educa- - DPL-DDO ency of public expendi- wiLL support the im- tion sector information - RuraL roads project tures in all three leuels plementation of Gopds tooLs and 15 oatasets of the Gouernment and Open Gouernment and auaiLable for internal Knowledge services in oIl three democratic transparency agenda management and Ongoing powers by incLuding social pubLic access by 2018 - TA- GPSA grant for Social auditing in its new in- (2013 BaseLine: 0) AccountabiLity uestment program and Proposed strengthening sociaL At Least two social. - Programmatic Gouer- accountabiLity mech- accountabiLity mech- nance AAA (partLy under anisms in the existing anism under the Open PAAP) portfoLio Gouernment initiatiue - TA to the Ministry of (such as the social au- Education to improue qual- diting of the Teopor ity of education and help program) successfuLLy target FONACIDE funds impLemented by inde- to needed schooLs (partLy pendent CSOs by 2018 under PAAP) 29 The Open Information Law (Ley 5189/2014) makes mandatory the publication of salaries and allowances received by the civil service. disggegte ResuLts Area Nationot. Deuetopment Expected CPS Outcomes/ Key WBG Actiuities Plan/ WBG Result Indicators (FY15/16) Indicators 3. Fostering mar- The NDP aims at foster- #3.1 Improved agricul- Income of 15 percent Financial seruices: ket integration ing market integration tural productivity and af paar househaLds Ongoing: to create better oppor- access ta markets far (aut af 130,000) in -PRODERS tunities for smaLL-hold- smaLL-halder farmers Cancepci6n, San Pedra, - Rural Raads Project er farming communi- Conindey6, Caoqua3 - SME and agribusiness ties to participate in The WBG will suppart and Caap6 increased campetitiveness (IFC) markets and improue increased praductuity by 30 percent by 2018 Proposed overaLl connectivity of smaLL-holder farmers (2013 BaseLine: annual - Micro financing to farm- through interuentions income is G4 miLLion) ing communities (IFC) NDP 2030 target: that increase technical - Indicator is gender - Reducing to less than know-how and access disaggregated KnowLedgeseruices: 3% the productivity to inputs and markets Proposed. gap of land use be- 130 additional indig- - PA Financial sector icLv- tween family farm- enous communities' sian deueLopment ing and commercial (representing more - Farm to market study farming than 50 percent of Indigenous PeopLes in Paraguay) economic development improved through enhancemenr of organi3ationaL ca- pacity and bet:ter quaL- iy Liuing conditions by 2018 (2014 Baseline: 4S communities) - Indicator is gender disaggregated GoP aims at improving #3.2 Increased private At: Least two public Financial services: road infrastructure investments in logistics private part:nership Ongoing: and conneclivity in the projectsinitiatives and transactions in lons- - RuraL Roads projec poorest par s of the reduced logistics costs port/Logistics by 2018 -PRODERS count:ry through inuest- (2014 baseLine: 0). Proposed: ments in feeder and The WBG pLans to heLp - Rural. Roads project trun roads GoP identify Logistics TraeL time on two 200 botLenes and attract m segments of roads KnowLedgeservices NDP 2030 target: priuae Inowledge and in seLected priority De- Proposed - Consolidation of funds to addressing partments (San Pedro, - Farm I marret study efficient and effective them Caaguag6, Caagap6 - TA in PPP transport network or simiLar) reduced by that reduces logistics at Least 30 minutes by casts to internotionally 2018 (Baseline 2014: competitive levels average travel. lime for 0200 im segmen of a national road 3 hours and 20 minutes; 2018 target: average traveL time for a 200 k?m segment of a national road 2hours and an minutes). 9ud oadesn ANNEX 2 Paraguay CPS FY10-14 Completion Report (CPSCR) CPS May 5, 2009 Report No. 48087-PY CPSPR April 9, 2012 Report No. 66782-PY I. INTRODUCTION 50 II. CPS PROGRAM PERFORMANCE 51 A. Overview 51 B. Progress by Strategic Engagement Themes 51 Pillar 1. Governance and Anticorruption 51 Pillar 2 Poverty 52 Pillar 3. Economic Growth with Inclusion 53 IlI. WBG PERFORMANCE 55 A. Program Implementation and Portfolio Performance 55 B. Management of Risks 56 IV. LESSONS LEARNED AND RECOMMENDATIONS 58 ANNEXES 1. CPS Results Framework 59 2. Planned Lending Program and Actual Deliveries 76 3. Delivered AAA (FYO9-14) 77 I. INTRODUCTION gram provided greater access to basic infrastructure ser- vices, such as water, sanitation, electricity, and transporta- 1. This Country Partnership Strategy Completion Re- tion. In the timeframe of the CPS, four lending operations port (CPSCR) is a self-evaluation by the World Bank Par- for a total of $364 million were approved." aguay country team of its performance in implementing the Country Partnership Strategy (CPS - report #48087- 5. Knowledge and convening services have become an PY) for the period FY09-14. The CPSCR summarizes and important element of the Bank's engagement with Para- evaluates the support provided through the delivery of guay; the Bank delivered 31 analytic and advisory activi- a tailored development solutions package of financial, ties (AAA) in the timeframe that spans this report, in ar- knowledge, and convening services. The CPSCR is intend- eas such as governance/anticorruption, fiscal framework, ed to (a) assess CPS program performance to achieve the service delivery, and growth/competitiveness. This effort Bank's" expected outcomes measured against the updat- was not unaffected by the aforementioned changes in ed CPS Results Matrix; and (b) assess the Bank and IFC per- the national administrations, which produced conflicting formance in delivering their respective programs.1 The priorities and demands. CPS implementation lessons are aimed to help formulate the new engagement with Paraguay. 6. In the private sector, IFC has had a highly success- ful program, significantly increasing its investments in 2. The CPS provided a framework for a flexible, knowl- Paraguay since 2009. The program has a strong focus edge-focused partnership with somewhat less innovative on financial services, but has also supported Paraguay's tailored financial solutions in three key thematic areas: burgeoning agribusiness sector and made several river (i) Governance and Anti-Corruption; (ii) Poverty; and (iii) transportation investments. These enabled IFC to reach Economic Growth with Inclusion. substantial numbers of the poor and underserved. IFC transactions with local banks have supported microfi- 3. The CPS Progress Report of April 2012 (CPSPR - re- nance, small and medium-size enterprises (SMEs), and port #66782-PY) reaffirmed the Bank's support to the small farms through earmarked loans to increase the three key original thematic areas, while introducing some availability of longer-term and local currency financing to adjustments to the results framework in light of shifting these client segments. priorities and implementation fine-tuning. The program performance is evaluated against the adjusted frame- 7. Overall, program implementation was slow for most work. of the CPS timeframe. In coordination with the respective governments, the Bank continually worked to improve 4. The lending program has responded to evolving implementation, including by providing: (a) capaci- Government priorities; it supported structural areas of ty-building workshops in procurement, safeguards, and the Government's long term development program, as financial management; and (b) monthly project-specific well as its response to the impact of the global economic procurement support. As a result of this concerted effort, crisis of 2009.32 More specifically, the program supported implementation improved in the second half of the CPS, the government's economic policies and its capacity to with the portfolio reaching a 21.8 percent disbursement provide basic services. The economic policy components ratio in FY14. However, implementation challenges re- provided support in areas such as fiscal transparency and main. The combination of complex project design, lack macroeconomic policy; it also provided budget support of coordination between co-executors of different com- after the global crisis. The other aspect of the Bank's pro- ponents of the projects, frequent staff turnover in some project implementation units (in particular because of 30 From this point forward, references to the "Bank" refer exclu- the political turmoil in 2012), limited technical and safe- sively to IBRD. guards capacity, complex safeguards arrangements, and 31 IBRD and IFC strategies were developed separately, because lFC began operations in the country after the CPS was drafted and discussed by the Board of Executive Directors. contributed to implementation challenges. 32 The difficult period of the global economic crisis was exacerbat- ed by drought and outbreaks of foot/mouth disease in the cattle in- dustry.This period also experienced strong political turmoil, leading to the impeachment of President Fernando Lugo in June 2012; this 33 Unless otherwise specified, the currency used throughout this was followed by three different governments in the CPS timeframe. report is the U.S. dollar. 9uy h akdlvrd3 nltcadavsr cii 8. Traditional politics in the Legislative Branch was an the establishment of internal control norms for ministe- important element driving effectiveness delays. Overall, rial budgeting. Through the Global Partnership Facility projects took an average of 8.9 months to become ef- (GPF) Building Accountability Coalition Project (P1 17391), fective; for lending operations the average delay was 9.4 training was provided to 196 journalists, as well as ca- months and for trust funds the average was 8.2 months. pacity-building programs for various ministries creating When combined with limited local capacity to prepare frameworks for the transparent dissemination of infor- and manage projects and frequent staff turnover, imple- mation in Government agencies. In addition, specific mentation delays were inevitable. attention was given to governance in the portfolio: the Road Maintenance Project (P3082026) developed an In- 9. Based on an extensive analysis of the CPS outcomes prove Governance Action Plan (IGAP), which has been during the implementation period, the program per- functioning within an electronic platform (Control Board) formance is rated moderately unsatisfactory and the since 2010; the uses of the Control Board and IGAP have Bank's performance in implementing the strategy is rated been expanded to all activities and projects managed by as fair. the Ministry of Public Works. The Sustainable Agriculture and Rural Development Project (PRODERS) (P088799) has II. CPS PROGRAM PERFORMANCE helped strengthen neighborhood committees in 30 mi- cro watersheds to allow for control mechanisms for public A. Overview sector investments; and the Water and Sanitation Sector Modernization Project (P095235) has its own website, 10. Program performance evaluates the expected re- as well as an action plan for a governance strategy and suIts by end FY-1 4 as presented in the CPS and updated in a framework to monitor governance indicators. Achieve- the CPS Progress Report of April 2012. CPS performance, ments include the establishment of quarterly reports on particularly the pace of implementation, was a challenge product delivery and outcome indicators within various throughout the period; this is reflected in the achieve- government agencies. Through AAA, the Bank has assist- ment of the intended objectives, which were in the most ed the institutional strengthening of the National Audit part partially achieved. Of the 42 outcomes in the results Office and the legislative budgeting proceSS.34 matrix, 14 were achieved, 17 partially achieved, and 11 not achieved. Furthermore, three of the four active lend- 12. Modernization of the public administration to im- ing operations have been rated "problem projects" for prove service delivery. The programmatic DPLs and some most of the CPS period under review. Thus, the World advisory services helped improve the functioning of the Bank's overall program performance is rated moderately public administration across a range of institutions: min- unsatisfactory. istries, the CBP, and state-owned enterprises (SOEs). At the request of the MoH, a Public Expenditure and Finan- B. Progress by Strategic Engagement Themes cial Accountability (PEFA) assessment led by the Europe- an Union (EU) was conducted jointly with IADB and the Pillar 1. Governance and Anticorruption: Strengthen- Bank until 2011. It concluded that important progress had ing state institutions to improve policymaking, public been made in the area of internal controls and audit (in service provision, and rule of law for investments and particular, a standardized internal control framework was households introduced by decree and intensive capacity building to support implementation). The work on internal control 11. Fighting corruption and increasing transparency. and internal audit at the Central Government contributed To promote good governance and anticorruption, the to reform implementation at the Office of the Executive's Bank provided analytical and advisory activities and built Internal Auditor (AGPE), providing broader coverage and in governance in lending operations. Two Development higher quality of the internal audit function, and expan- Policy Loans (DPLs) (P1 13457 and P117043) successfully sion of a set of internal control rules within 70 percent of helped to establish internal financial controls for inten- sified government accountability. Specifically, they con- 34 SFLAC Strengthening Paraguay National Audit Office (P120057) tributed to the implementation of a merit-based civil (Closing Date 30-Jun-2014), and Strengthening Congressional Legis- service recruitment and promotion system, as well as to lative Process and Budget Oversight Capacity TA (P15219), respec- tively. ateto asgvnt gvrac i h otflo9h ministries, paving the way for the improvement achieved (household) agriculture, (c) increasing enrollment ratesand in various ministries. Support to the CBP included knowl- the qualityof secondary education, (d) increasing accessto edge services (FBS Payments System P110984 and RAS waterand sewerage services forthe entire population, and Payment Systems #2 P122533) to set up automated trans- Ce) increasing access to basic health services ofgood quality. fer systems for processing of payments as well as creating a legal and regulatory framework for their operation. The 15. Poverty reduction and employment generation. strategy envisioned improving civil servant recruitment Together with the Paraguay Public Sector Reform DPL and promotion practices by implementing a merit-based CP1 13457), various poverty assessmentS36 were conduct- framework. Progress toward achieving indicators includ- ed to analyze, through new methodologies, the deter- ed a draft law that was presented during President Lugo's minants of poverty and to increase the impact of Gov- mandate. It delivered a diagnostic of the state of human ement transfer programs. More specifically, the AAA capital in the MoH and provided concrete recommen- focused on improving the scope and targeting of the dations to improve its status; however, there was no en- government cash transfer program "Tekopord" as well as forcement mechanism for the system. A revision of inter- the non-contributory pensions program "Adultos May- governmental transfers was undertaken. ores.' Targeting under Tekopord significantly improved through the introduction of a geographic targeting and 13. Increasing the transparency of SOEs and setting a door-to-door census.The number of households integrat- framework through which they can operate more effl- ed into the program has exceeded its target C40 percent ciently was addressed through the public sector strength- of households in extreme poverty are covered under the ening DPLs and their complementary knowledge services; program) and various methods have been designed to as well as within the water and energy sector IPFs35. The fine-tune the programs'targeting; however, the frequen- DPLs (P113457 and P117043) addressed SOE strength- cy of transfers has been unstable since 2010 because of ening by: (a) developing a mechanism for the payment budgetarydifficulties.Atthesametime,achapteron Par- of SOEs' outstanding debt (this wasn't completed); (b) aguay's non-contributory pension was included in the re- increasing the rate of timely payments (from 27 percent gional study Beyond Pensions in Latin America (P129699). to 51 percent); (c) strengthening SOE internal audit sys- Finally, during the last phase of the CPS, the Bank pro- tems; and (d) implementing Results-Based Management vided technical assistance (TA) to the Ministry of Justice contracts. The Energy Sector Program experienced imple- and Labor to review and assess its National Employment mentation delays - and the goal of reducing power out- Strategy, including the initial design of a Temporary Em- ages and their adverse effects on the economy was not ployment Program. achieved because of implementation such delays. The Water and Sanitation Project has provided more tangible 16. Poverty and macroeconomics. Preparing strate- results: each W&S agency has developed its own website gies to respond to the effects of an economic crisis that and various institutions are working on frameworks to implicates employment was set as an important part of provide more information (for example, financial state- the Bank's engagement, for which it prepared a series ments) through these websites. Complementary knowl- of five AAA prodUCtS.37 The AAA activities examined the edge services included PY Public Sector NLTA (P1 17046) link between growth, employment, and poverty reduc- and the PY Public Sector Effectiveness (P120699), which tion; other activities analyzed these trends through the aimed to generate new pricing mechanisms to address country's Mercosur trade strategy. The results show that SOE internal finances. growth and poverty reduction seem to be linked through three main phenomena: Ca) high levels of initial inequality Pillar 2 Poverty: Improving investments in the social in income and assets holdings (such as land); (b) a rural sectors (Health and Education) and focusing public growth pattern; and Cc) rising food prices that affect the spending on fighting extreme poverty 36 PY Equity Assessment and Poverty Support (P1 32332); PY Social 14. TheWBG partnership under this pillar was designed to Protection NLTA (P106877); NLTA Programmatic Poverty 11 (P123533); contribute to (a) employment generation and poverty re- Paraguay HD Programmatic Activity (P146699). 37 PY Equity Assessment and Poverty Support (P132332); PY duction, (b) agrarian reform and reactivation of small-scale Social Protection NLTA (P106877); NLTA Programmatic Poverty 11 (P1 23533); Paraguay HD Programmatic Activity (P146699); and PY 35 Investment Project Financing (IP) MercosurT rade Study (P108545). 9oue nipoigtesoeadtreigo h extremely poor. The Bank also engaged in the review of 19. Increase access to water and sewerage services the National Employment Plan, which supported the cre- for the entire population. The WBG addressed this goal ation of an independent Ministry of Labor, Employment through the rural and urban components of the PYWater and Social Security, to allow for a more rapid, focused, and and Sanitation Sector Modernization Project (P095235). efficient institution to respond to labor market issues. Although the project experienced significant start-up delays, implementation is gaining momentum at the end 17. Integrated agrarian reform and reactivation of of the CPS period and the development objective is still small-scale agriculture. The preparation of a coherent re- within reach. Under Component 1 (Support to the Mod- form of the agriculture sector was an important part of ernization of the Sector), the project has sofar developed the actions set out by both the Government and the Bank and is implementing a Governance Action Plan to im- to reduce poverty. The Bank's projects involved programs prove communication, participation, transparency, and such as the aforementioned Sustainable Agriculture and accountability in the sector and is finalizing the prepara- Rural Development Project (PRODERS) (P088799)" to tion of the national water and sanitation policy and strate- provide support to the rural poor population and to in- gy. The second component focused on strengthening the crease the number of indigenous communities with for- Empresa de Servicios Sanitarios de Paraguay (ESSAP); this mal property titles. PRODER has been a success and addi- intervention has registered some progress and works are tional financing was requested, which was processed by currently in progress. To date, the third component (Rural the Bank team in record time. A Country Land Assessment Water Supply, Sanitation and Hygiene education and In- (P123711) was carried out to assess land use change and stitutional Strengthening of SENASA) has provided access to evaluate the land property market. It established a to safe water and sanitation services to some 17,500 peo- strong link between access to agricultural credit and in- pIe, of whom 6,200 are indigenous peoples who received equality, as well as limited access of the poor to leased access to improved sanitation services (latrines). land; it also recommended framing land reform within a broad rural development strategy and explained the 20. Increase access to basi health services of good risks of unsustainable grazing with respect to long-term quality. Through the Paraguay Health Sector Medium soil erosion. In addition, the Bank supported Government and Long-Term Vision study (P1 11929), the Bank, in part- efforts through facilitating a knowledge exchange about nership with the Ministry of Health and in coordination land reform experiences in LAC. with other development agencies, prepared a policy framework to discuss measures to increase access to ba- 18. Increase enrollment rates and quality of secondary sic health services among the poor while simultaneously education. As part of a strategy to increase registration reducing their out-of-pocket expenditure on medication. rates and the quality of secondary education, during the The analysis was timely and of good quality and helped second half of the CPS period the Government requested shape government's policy decisions, including the elim- Bank assistance to develop a methodology that would ination of user fees. However, its impact was limited be- help identify the most important needs of the school cause of low demand from the client during the changes system.To that end, the Bank delivered the"Improve Evi- in government. dence-Based Decision-Making within the Ministry of Ed- ucation of Paraguay" study (P129179), which found that Pillar 3. Economic Growth with Inclusion: Fostering reforms to improve access to education should focus on growth with a focus on employment generation and designing a financial structure to ensure the provision on improving income distribution, without destabiliz- of basic infrastructure and school inputs, as well as put- ing the country's macroeconomic framework, and in ting in place policies to increase the quality of schooling, an environmentally friendly manner including explicit and transparent rules for recruiting, training, and motivating teachers. These findings were 21. Under pillar 3 the Bank's partnership focused on de- disseminated through several workshops to relevant signing ways to: (a) appropriately respond to the global partners. financial crisis, while safeguarding macroeconomic and financial stability; (b) moving toward a more sustainable 38 The project is currently ongoing and has obtained an addition- pattern of growth, based on greater diversification of prod- al financing for US$ 100 million which is awaiting effectiveness by ucts and external markets; (c) supporting investments in the Legislative Branch. thog h urladubn opnnsofteP9ae infrastructure and human capital, as well as improving the such as the PY Public Expenditure Review (P127351) iden- investment and business climate; (d) finding new sources tified the limitations of fiscal policy and the tax system on of growth and improving the economy's overall competi- inclusive economic growth; it also presented policy op- tiveness; and (e) safeguarding the environment. tions, but its impact was limited because of the change in government. Nonetheless, following this Bank support, 22. Responding to the global financial crisis and safe- the share of social programs in the overall budget ex- guarding financial stability. The Bank's engagement, ar- penditures increased during the crisis, while coverage of ticulated through a Public Sector Reform DPL (P1 13457) social protection programs increased more than six-fold; and complementary knowledge services, concentrat- thus there was a partial achievement of the indicators for ed on building the institutions and conditions through investment to GDP ratio (3 percent in 2013, against a tar- which the country could absorb possible future shocks. get of 3.5 percent). These initiatives have helped improve the tax/GDP ratio,31 fostered adoption of an anti-crisis counter-cyclical stabi- 24. Infrastructure investment and diversification. To di- lization fund, and introduced a more effective tax policy versify and provide an improved business climate, the CPS aimed at large taxpayers. The complementary technical focused on investment and maintenance of infrastructure assistance completed various crisis simulation exercises, for the national energy system and the road network. The which helped to test government tools and procedures Paraguay Energy Sector Strengthening Project (P114971) to manage financial distress and possible systematic cri- focuses on modernizing the energy agency (ANDE) and sis. IFC served its counter-cyclical role during the financial installing an advanced metering system for high energy crisis, creating an Asset Management Company (AMC) consuming customers, with the objective of improving to mobilize third-party and IFC contributions to capi- service quality by reducing power outages. The project talize banks worldwide. In 2009, AMC provided the first experienced implementation delays but began to ad- of such funds in Paraguay by investing during the crisis vance in February 2014 after the mid-term review. The much-needed equity ($20 million) in Banco Continental construction and maintenance of road infrastructure (Paraguay's second largest bank). was addressed through the Road Maintenance Project (P3082026), which helped pave 1,210 km of roads and in- 22. Financial inclusion has been an area of WBG sup- troduced performance-based contracting for road main- port, and the build-up of IFC's investment portfolio with tenance through the"Gesti6n y Mantenimiento de Carret- the country's main financial institutions is bearing fruit. eras por Niveles de Servicios"(GMANS) system. Regarding As of end-2012, IFC's financial markets clients had ap- the complementary knowledge services, the PYTransport proximately 20,000 SME loans outstanding for $1.6 bil- Sector Assessment (P106825) has provided a detailed di- lion, making 2012 the third straight year during which agnosis of road infrastructure quality and the Transport Paraguay's average SME loan size ranked in the top two Sector Assessment TA (P106825) provided an analysis of among LAC lower-middle-income economies. In addi- the country's aerial, water, and terrestrial transport sys- tion, IFC clients supported 30,226 microenterprise loans tems and government expenditures on these items. In- outstanding for approximately $36 million (-$1,200/loan provements in river navigation were approached through average). Overall, these investments have reached close technical assistance through the Support for the Design to 33,000 farmers and have generated about $3 million in of River Navigation Concessions-Phase 11 (P122325), which tax revenue for the GoR In addition, IBRD has delivered on evaluated the likely benefits of investing in river navi- knowledge services to analyze the possibility of develop- gation; and the PY Infrastructure and Logistic (P129630) ing a mobile phone-based payment system for the rural created an expert workshop to analyze the required infra- poor (P144971). structure logistics to dredge the Paraguay River. Although there has been substantial progress in both investment 23. Public spending targeting. The internal financial con- operations and various knowledge services were deliv- trol components within both DPLs focused on taking ad- ered, the expected outcomes were not achieved due to vantage of fiscal headway and utilizing it for targeted so- the initial delays. IFC has had a strong engagement in the cial spending. Economic and sector work (ESW) initiatives sector, providing financing to increase the availability and efficiency of barges in the hidrovia; IFC's support to barge 39 The tax/GDP ratio reached 11.5 percent in 2013, against a tar- transport operators in the hidrovia covers about 30 per- get of 13.0 percent. 9edtrsicesddrn h rss hl oeaeo cent of the country's transport of soy production and 40 WBG PERFORMANCE percent of fuel transport. 27. The Bank's performance is rated as fair albeit noting 25. Growth and competitiveness. The Bank delivered IFCs successful and sizable program expansion. Although a number of knowledge products, such as the Inclusive the Bank's engagement was aligned with the country's Competitiveness Study - Phase 1 (P1 26568), the Implica- development objectives and correctly addressed some tions ofTrade Liberalization (P1 19925) and the 2013 Public of the portfolio's fiduciary issues, it lost the opportuni- Sector Effectiveness study (P1 20699). The Inclusive Com- ty to address the numerous issues that were identified petitiveness Study found great potential in public-private during the time of the CPS Progress Report. The Bank partnerships (PPPs) and contributed to the adoption of team should have followed up on various activities more the PPP law. The trade liberalization study examined the closely (for example, when restructuring operations); it literature on what represents a perfect customs union also should have increased its presence in the country and presented a set of recommendations on how to use office in order to resolve the basic implementation and tariff revenue between countries, following the example administrative issues that arose during the CPS. Knowing of the EU and the Southern African Customs Union. IFC that effectiveness delays were a problem in the country, has also supported the increase in trade transactions it should have engaged the Legislative Branch in a dia- through its global guarantee program. IFC's trade finance logue on the important development outcomes of new program with five Paraguayan banking institutions worth investment. $110 million has guaranteed over $450 million in trade flows, primarily related to fertilizers, agri-machinery, Design and Releuance agri-commodities, leather, and meat; this effort intro- duced Paraguayan local banks to global IFC client banks 28. TheCPSwasrelevantforthecountryandwasaligned with which they had no previous relationship. IFC guaran- to the development goals and the Government's agenda tees provided comfort to these global banks to undertake and priorities. The CPS was envisaged to be flexible and and increase transactions against a background of polit- responsive to Government requests. However, the polit- ical risk in Paraguay. In 2013, IFC provided seed capital in ical changes and turnover of officials made it difficult for a project to explore for oil and gas in the Chaco region, the Bank to carry on the dialogue in the context of shift- the success of which would be a game-changer for the ing priorities and demands by the different governments. country, potentially allowing the country to achieve fuel self-sufficiency. In 2012, IFC used trust funds to support 29. The CPS was designed to provide a total of $364 the PPP program to analyze the potential concession of million in new operations; it originally envisioned sev- the country's main airport in Paraguay. In 2010, IFC also en lending operations (three DPLs and four investment used Public-Private Infrastructure Advisory Facility (PPI- loans in land access, education, safety nets operation, AF) funds to diagnose the financial situation of the Mu- and electricity). The original CPS period, 2009-mid-2013 nicipality of Asunci6n and provided recommendations to was extended until December 31, 2013 to align the next improve financial management. strategy with the new Government's term. Although this strategy was not developed jointly with IFC (as previous- 26. Safeguarding the environment. As part of the search ly explained), since 2009 it has incorporated a vast array for new paths toward growth and poverty reduction, the of new IFC operations, which were reflected in the Prog- CPS focused on natural resources management in rural ress Report and are included in the Results Framework areas. This involved work on reducing unsustainable for- (see Annex 1). est management practices and strengthening the institu- tions in charge of environmental management through A. Program Implementation and Portfolio the GEF-financed Project Conservation of Biodiversity and performance Sustainable Land Management in the Atlantic Forest of Eastern Paraguay (P094335). This project got off to a slow 30. The portfolio experienced a series of challenges that start because of overly complicated institutional arrange- ultimately shaped its performance (see Table 2). The chal- ments coupled with frequent staff turnover in the project lenges that defined its pace of implementation and dis- implementation unit (PIU). bursements were: (a) complex project designs; (b) delays ofteprfoi' iucayise, tls9heoprui in effectiveness; (c) the complex government annual bud- financier of preference. IFC has the largest disbursed and get cycle; (d) limited technical, fiduciary, and safeguards outstanding portfolio among all multilateral institutions capacity; (e) lack of coordination among co-executors of in Paraguay, at $260 million. IFC has booked 32 new oper- different components of projects; (f) frequent staff turn- ations since 2009. over in some project implementation units, consequent upon political changes; (g) a limited use of South-South 34. Knowledge services were focused on strategic sector experiences; and (h) limited resources for supervising in- reforms linked to poverty reduction, inclusion, and gov- vestment projects. These ultimately contributed to the ernance. The Bank's engagement delivered 31 products: performance rating of Moderately Unsatisfactory. 13 ESW and 18 TA; these were focused on various themes, with public sector governance the leading one, followed 31. The Paraguay portfolio was adversely affected by by financial and private sector strengthening, and eco- political turmoil during the impeachment of President nomic policy. However, even with the Bank's efforts to Fernando Lugo in 2012, which resulted in three presiden- disseminate these works, AAA delivery encountered tial regimes during the CPS period: Mr. Fernando Lugo, challenges within the CPS period. The main issue was the followed by Mr. Federico Franco, who was succeeded by shifting political landscape, resulting in changing coun- Mr. Horacio Cartes in August 2013. The Bank conducted terparts within Government agencies and their priorities. an ongoing assessment of the situation and during this period implementation of the portfolio proceeded nor- 35. Paraguay lags well behind its regional counterparts mally. However, it faced the challenge of working with on the amount of South-South knowledge exchanges a new administration (and in some cases with new PlU that it has completed. Only eight South-South knowledge staff), which ultimately led to significant implementation exchanges were prepared in the time frame of strategy. delays. No new lending and technical assistance were approved during this period (June 2012-April 2013). The 36. Aiming at presenting issues and options for the selected instruments were two DPLs focused on public in-coming government, the Bank prepared and present- sector reforms, each for $100 million40, and two invest- ed a set of Policy Notes in September 2013. The Notes ment loans, one to modernize the country's energy sector were prepared for sectors in which there were successful ($100 million) and the other to modernize its water/sani- past engagements and where the Bank has a compara- tation sector ($64 million). tive advantage. 32. The active portfolio carries ongoing projects from 37. Trust funds have been used selectively in the Bank previous strategies. The PY Road Maintenance Project program to support key institutional reforms and proj- (P082026) disbursed 65.04 percent of its funds and the ect implementation. Of the 19 ($7.6million) trust funds Sustainable Agriculture and Rural Development Project approved during the CPS period, 11 were administered (P088799) disbursed 70.28 percent.41 The active portfo- by the WBG, the rest by the recipient. These supported io's disbursement rate has shown improvements from activities related to strengthening national budgetary the first quarter of FY14; the rate is currently 21.8 percent oversight, public sector reform and governance, indig- for FY1 4,'42 which shows an improvement in disbursement enous land regulation, natural resources management indicators for the entire portfolio when compared to pre- (GEF), and the national statistics office. Trust fund per- vious years (not including DPL disbursements). formance was poor; the underlying causes were the same as those encountered for lending operations. Ef- 33. Given its focus on the private sector as its inherent fectiveness delays were also common, as a consequence preferred creditor status, IFCs operations continued to of the need for the Legislative Branch approval for recip- grow during the political turmoil. This provided confi- ient-executed trust funds. dence in the private sector, strengthening IFCcs status as a ____________________________ B. Management of Risks 40 The Cs envisioned three DPLs, the final two were merged into a single $100 million public sector strengthening project versus two 38. Political risks identified at the beginning of the part- $50 million projects to take advantage of the Legislative Branch ap- proval windows. nership had a strong effect on the effectiveness of the 41 AsofJunell,2014. Bank's engagement. The Bank's strategies to ameliorate 42 AsdofiJune d 3 6 2014. 9utial giutr n ua eeomn rjc TabLe t IBRD Portfolio FY10-14 Fiscal year 2009 2010 2011 2012 2013 2014 # Projects 6 3 4 5 4 4 Net Commitment Amount 317.5 175.5 275.5 375.5 275.5 375.5 # ProbLem Projects 3 0 3 3 3 2 % Potential 16.7 66.7 0.0 40.0 25.0 50.0 # Projects at Risk 4 2 3 5 4 4 % Commitment at Risk 48.3 57.8 63.7 100.0 100.0 100.0 % Problem Projects so 0 75 60 75 so % Proactiuity 100 33 0 33 Tot Undisbursed BaLance 183 170.5 258.3 236.9 216.4 269.1 Tot Disbursed in FY (No DPLs) 5.82 2.23 12.205 21.48 20.46 47.2 Disbursement Ratio 4.67% 1.22% 7.16% 8.32% 8.64% 21.81% these risks consisted of: (a) support to the MoH to im- has been a significant improvement in disbursements prove its communication strategy for building consensus since the second quarter of FY14. and obtaining approval in the Legislative Branch; and (b) AAA to support ministries to better inform stakeholders 41. Social tensions regarding land tenure escalated; so- of their investment programs and the results and impact cial risks were assessed as high. The CPS identified the of the reforms. pressures from social demands as a risk to deliver quickly on its program. The political transition generated high ex- 39. Macroeconomic volatility had a strong effect on pectations, particularly among the rural poor and indig- overall partnership effectiveness. Paraguay is exposed to enous peoples, for urgent social needs and land tenure fluctuations in international demand and prices for com- reform, which were not met due to political bottlenecks modities through its strong dependence on agriculture and a lack of consensus on an agenda. The Bank assisted exports. Within the CPS period, the country experienced in the mitigation of this risk by aiming to improve social an unstable environment for its agriculture exports: first safety net targeting and land use targeting. a strong deterioration of world demand, which gave way to a -4 percent growth rate in 2009, followed by an 13.1 42. ThefiduciaryriskwashighintheCPSperiod.TheGov- percent growth rate in 2010, and finally sluggish growth ement made strong efforts to address weaknesses in its toward the end of the CPS period (the average growth control system identified in the CPS; despite these efforts, rate during the CPS timeframe was 4.49 percent). As an the lack of accountability, inadequate human resources amelioration strategy, the Bank produced and delivered policies, and cumbersome procedures and work practices the PY Volatility Analysis (P143809), which presented a set impeded the effectiveness of the strategy. The Bank will of policy options to mitigate the impact of volatility on continue providing close supervision to the program and the poor and to improve the country's resilience to mac- related technical assistance in future engagements. roeconomic shocks. 43. Environmental and social risks have materialized in 40. Limited institutional capacity has caused delays in some projects. Implementation of infrastructure projects the Bank portfolio. Progress in the Bank program was has raised some concerns at the community level or with affected by weak human resource capacity in the public indigenous people. The Government made efforts to ad- sector, as well as limited inter-institutional cooperation. dress them. However, the lack of capacity combined with The Bank and the Government monitored the program the complex design of safeguards instruments have led to through annual Country Performance Portfolio Reviews implementation delays. The Bank has provided technical (CPPRs) and action plans to address the problems identi- assistance and has deployed expert personnel to address fled, but overall problems still remain, even though there specific issues with a more intensive supervision scheme. 9h IV LESSONS LEARNED (g) To establish a smooth channel of communication with AND RECOMMENDATIONS the main IBD counterparts, the MoH and the STR (h) To jointly prepare the next CPS in coordination with 44. Given the experience of the implementation of this IFC. CPS, it is recommended: (i) To explore the use of different WBG instruments and services (DPLs, IPFs, TFs, Reimbursable Advisory Ser- (a) To pay closer attention to the preparation stage of vices, TA, ESW) and their complementarity in key ar- projects and to allocate additional resources to this eas on which the Bank and the Government agree. It phase of the cycle. is also recommended to increase the association be- i. This could include the support to technical prepa- tween knowledge and lending services. ration of social and environmental management, (j) To increase the amount of South-South knowledge where the existing instruments have shown to be exchanges. complex and sometimes cumbersome to the exist- (k) To involve the national indigenous peoples institu- ing capacity in the country. tions as part of project governance or advisory struc- ii. Projects should be designed assuming long effec- tures in order to win their support when dealing with tiveness delays. The project's life span should be eventual claims or conflicts. expanded taking into account an 18-24 month (1) To simplify the CPS and Results Matrix design. Given delay in effectiveness. During this period, teams the envelope and the size of the portfolio, it would be should advance on the preparation of procure- good to include up to 10 outcomes. It is also import- ment documents in order to quickly advance ant to present relevant and measurable indicators for when legally able. all outcomes in order to correctly reflect the portfolio (b) Following the experience that led to an increase in the performance. overall FY14 disbursement ratio to 21 percent, it is rec- ommended that disbursement profiles be designed to 45. In order to prevent knowledge services from failing start disbursements at a later stage of the project. to influence decision making and policy design, the Bank (c) To strengthen the management capacity of the imple- must monitor AAA more closely. Within the next CPS the mentation teams in Paraguay in order to improve the WBG must pursue a joint analytical and advisory program execution and disbursement of the portfolio, through given the big demand for such services, which should be increased BB resources for supervising projects and complemented by RASs and just-in-time policy notes on enhanced efforts of supervision (e.g., monthly CMU- specific topics following the pattern adopted by many TTLs meetings to follow upon portfolio performance). MICs. (d) To maintain the capacity-building efforts such as the ones initiated during the second part of the CPS pe- 46. The Bank can strengthen its collaboration with riod, concentrating on fiduciary and safeguards top- groups outside of the Government. As the World Bank ics. To continue the monthly capacity-building activ- Paraguay Country Survey FY13 shows, while perceptions ities with PlUs and all relevant technical staff based of the way the Bank collaborates with the Government on their demand and with workshops for all PlUs as are relatively positive, there is room to improve the needed. To continue capacity-building efforts aimed Bank's relationships with NGCs and groups outside the at strengthening country systems to be able to sup- Government. port WBG investment lending operations in the fu- ture CPS. (e) To promote the use of simple designs, avoiding schemes with several executors and unnecessary project complexities; this should help reduce coordi- nation demands. (f) To develop a broader dialogue with The Legislative Branch in order to address project approval (such as the case of PRODERS); and the preparation of the new strategy. 9g oetbihasot hne fcmuiainwt CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator Status and Euatuation Summary Bank Group Program Lessons Learned I. Governonce and Anticorruption: Strengthening state institutions to improve poLicy-making, pubLic service provision, and ruLe of Law for inuestments and househoLds Fighting corruption and increasing transparency Improuing the independent roLe of the Achieued KnowLedge Seruices media as a "watchdog" of the powerful, 196 journalists trained on inues- GPF Building an Ac- generating a more pluraL communica- tigatiuejournaLism and using the countability CoaLition tions enuironment. acquired new skiLLs. to address systemic Feasibility study "System of pub- corruption in Para- Lic media" incLuding options for guay (P1117391) (FinaL regulatory prouisions deLiuered and Deliuery/CompLetion international seminar on PubLic Summary: 30-Aug-13) Media (October 2011). TF095023 Capacity-building program for Sec- retary of Communications and piLot with MoH in place. Supported the preparation of a study to compare international models of teLeuision stations and prouided a possible institutional design for Par- aguay that was used as a basis for drafting the decree that created the pubLic teleuision station in Paraguay. Supported Transparency week in 2011, which included seminars in Paraguay with regional experts to promote Access to Public Information LegisLation. Assisting the Gouernment in improu- Achieved Financial Services One of the main ing the effectiueness and articuLation Through the Stengthening Para- SFLAC Strengthening Lessons Learned of accountabiLity institutions to fight guay National Audit Office Project, Paraguay National was the need for corruption. the credibiLity and effectiueness of Audit Office (P120057) poLitical support the institution haue been enhanced, (CLosing Date: 30-Jun- for proposed achieuing these outcomes: 14) reforms. The success of the * The "ContraLoria GeneraL de La Paraguay Strength- SOE reform was Repbilica ening Congressional mainLy based (CGR) capacity assessment report in- LegisLatiue Process on the extraor- cLuding an action plan was deLiuered and Budget Ouersight dinary Gouern- (May 2012). Capacity (P115219) ment commit- * The Quality Assurance Reuiew (CLosing Date: 11-Jun- ment to reform Scheme has been completed. 13) IP: MS, DO: MS this area. * 30% of technical staff acquire mod- ern auditing techniques and are abLe Road Maintenance to carry out high quaLity audit. Project (P082026) * 7% increase in the number of (CLosing Date: 28-Feb- hits on the CGR website. ToRs for 14) 1P: MS, DO: MS communication strategy is under preparation. Water and Sanitaton * Two annuaL Grant audit reports in Moderni3ation Project preparation. (P095235) (CLosing Date: 31-Mar-15) IP: MU, DO: MU 14 rfrm.9h CPSCR Annex A. CPS Results Framework CPS outcomes CPS Outcome Indicator Status and Euauation Summary Bank Group Program Lessons Learned I. Governonce and Anticorruption: Strengthening state institutions to improve poLicy-making, pubLic service provision, and ruLe of Louw for investments and househoLds Fighting corruption and increasing transparency By improuing The LegisLatiue Branch' SustainabLe RuraL capacity to ouersee, formuLate, and DeueLopment Project disseminate LegisLation, the Strength- (P088799) (Closing ening the LegisLatiue Branch Process Date: 28-Dec-13) IP: and Budget Ouersight Capacity MS, DO: S Project contributed to improuing the quaLity and efficiency of public ex- Paraguay Energy penditures through these outcomes: Secor Strengthening Project (P114971) (CLos- * A Dashboard was impLemented ing Date: 31-Dec-15) IP: to monitor certain segments of the MU; DO: MU budget. * A contract was issued for the new Paraguay PubLic Sector payroLL system and asset manage- Refarm (P113457) ment system and is now in impLe- (CLosing Date: 01-Mar- mentation in both the LegisLatiue 11). Branch. PubLic Sector Refarm Road Maintenance Project includes DeueLopment PoLicy an Improuement of Gouernance Loan (P117043) (Cos- Action PLon (IGAP). The strategy is ing Date: 31-Dec-13) IP: under implementation and publica- S, DO: S tion in MOPC's website (April 2013). The uses of the Control Board and KnowLedge Seruices the IGAP haue been expanded to aLL StAR - Paraguay TA actiuities and projects of the MOPC. (P116759) (Completion Date: 28-Jun-12) The PY Water and Sanitation Moderni3ation Project foresees a PY PubLic Sector Good Gouernance Strategy for the Effectiueness (P120699) different seruice utiLities. The strategy (Completion Date: 26- aimed at supporting both the supply Dec-12) (corporate and other sector agencies) and demand (ciuiL society, including priuate sector) sides of gouernance. S Each WeuS sector institution has deueLoped a website. D Signature of citi3en commitment charts setting kPey planning couerage, enuironmental. and social. safeguards management, and gouerning reLa- tions between citi3ens and munici- paLities and ESSAP and SENASA. - Water and Sewerage Seruices Unit was created within the MOPC (DAPSAN), defining the poLicies for the sector. - ESSAP is wor(ing on settling issues related to assets which will enabLe the pubLication of its Punancial state- ments on the website. - Draft TORs and EOI being ninaLi3ed related to SLAPS deueLoped and gen- erating reports. - Draft TORs deueloped for the Infor- mation Management System in order to generate reports for managerial- edecisions. CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned I. Gouernonce and Anticorruption: Strengthening state institutions to improue poLicy-making, pubLic seruice provision, and ruLe of Low for investments and househoLds Fighting corruption and increasing transparency * The project's procurement plan has been published in the "Sistema de Ejecuci6n de Planes de Adquisiciones" (SEPA). The PRODERS Project has helped strengthen neighborhood commit- tees in 30 micro watersheds in the State of San Pedro and Caaguagu, aLLowing for social controL mecha- nisms for pubLic sector inuestments. The Procurement and Disbursement Plans prepared and submitted in a systematic manner throughout the Life of the project. The Energy Sector Strengthening Project has reuiewed draft ToRs for the deueLopment of the institutional assessment of the eLectricity sector. Paraguay PubLic Sector Reform: Annual pubLication of auailabLe audited financial statements for the iscal exercise of 2008 and the audit of 2009 inancial statements were carried out. Public Sector Reform Deuelopment Policy Loan: * Seuen SOEs haue management contracts establishing targets that are monitored on a regular basis by UMEP. These companies are ANDE, ANNP, COPACO, ESSAP, INC, PET- ROPAR and DINAC. As part of the PY stAR (P116759): The asset recouery speciaLiged unit (SU) has yet to commence operation and as a result there has been no appro- priate counterpart and no significant actiuity has been undertaken. As for the SOE component, the Law institutionaLiging the Consejo Nacional de Empresas Publicas was approued by the Legislatiue Branch in September 2013. This Law assures a sustainability of the reforms under- taken during the past fue years and wiLL further initiate aduances through its implementation. CPSCR Annex A. CPS Results Framework CPS outcomes CPS Outcome Indicator Status and Euauation Summary Bank Group Program Lessons Learned I. Governonce and Anticorruption: Strengthening state institutions to improve poLicy-making, pubLic service provision, and ruLe of Louw for investments and househoLds Modernigation of the Public Administration to improve service delivery Increase PEFA Indicators for PartiaLLU Achieved FinanciaL Services effectiueness Internal Control and Fue of 11 ministries, representng Paraguay PubLic Sector of internal Internal Audit (PI-20 70% of the oueraLL budget haue Reform (P113457) control and and PI-21) haue been estabLished internal control norms (CLosing Date: 01-Mar- internal audit upgraded. and committees and are using a stan- 11) function. dardi6ed internaL control framework; PubLic Sector Reform BaseLine: D+ (IFA 2008) consequentLy, the PEFA Rating for DeueLopment PoLicy Target: C (2013) internal control and external audit Loan (117043) (Cs- (PI-20 and PI-21) has increased from ing De: 31-Dec-13) IP: D+ in 2008 to C in 2010.The Gou- S, DO: S ernment has issued two decrees to SFLAC Strengthening upgrade the Office of the Executiue's Paraguay NationaL Internal Auditor (AGPE) to ministerial Audit Office (P120057) Leuel, accompanied by a significant (CLosing Dae: 30-Jun- increase in its budget and intensiue 14) IP: - DO: - staff training. Paraguay Strength- ening Congressional. Paraguay Public Sector Reform LegisLatiue Process Annual publication of auailable and Budge Ouersight audited financial statements for the Capacity (P115219) fiscal exercise of 2008 and the audit (CLosing Date: 11-Jun- of 2009 financial statements were 13) 1P: MS, DO: MS carried out. KnowLedge Services; Public Sector Reform DeueLopment PEFA (Dec 2011) Policy Loan: * ALL audit reports for 2011 of SOE Ouersight haue been pubLished on the UMEP website. In an effort to increase the quality of audits, audit companies for flue SOEs haue been selected by UMEP for this year. * Audited financial statements reports for seuen of nine SOEs were published before June 30, 2012 (on time). ANNP audit report was pub- Lished on July 17, 2012 and FEPASA (raiLroad) is not operationaL, so no audit report was prepared. * Seuen SOEs haue management contracts establishing targets that are monitored on a regular basis by UMEP. These companies are ANDE, ANNP, COPACO, ESSAP, INC, PET- ROPAR, and DINAC. Paau9Pblcsco CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator Status and Euatuation Summary Bank Group Program Lessons Learned I. Governonce and Anticorruption: Strengthening state institutions to improve poLicy-making, pubLic service provision, and ruLe of Law for inuestments and househoLds Modernigation of the Public Administration to improve seruice delivery Through the Strengthening Para- guay National Audit Office Project, the credibiLity and effectiueness of the institution has been enhanced, achieuing these outcomes: * ContraLoria GeneraL de La Republica capacity assessment report including an action pLan was deliuered (May 2012). * The Quality Assurance Reuiew Scheme has been completed. * 30% of technicaL staff acquire mod- ern auditing techniques and are abLe to carry out high-quality audit. * 7% increase in the number of hits on the CGR website. ToRs for communication strategy is under preparation. The Strengthening Congressional LegisLatiue Process and Budget Ouer- sight Capacity Project contributed to improue the quality and efficiency of public expenditures through these outcomes: * A Dashboard was implemented to monitor segments of the budget. * A contract was issued for the new payroLL system and asset manage- ment system and is now in impLe- mentation in the Legislatiue Branch. The cLearing and settlement of the CBP's Achieed KnowLedge Services payment system has been moderniZed A new Automated Transfer System PY - RAS Payment and Gouernment payments are made has been implemented with Bank Systems #2 (P122533) through an automated transfer system. assistance. The LegaL and regulatory (CompLetion Date: 23- framework for operating the system Jun-13) has been created and operational Paraguay (FBS) Pay- rules haue been communicated to ment System (P110984) priuate sector ban#s. (Cmlein ae:3 CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned I. Gouernonce and Anticorruption: Strengthening state institutions to improue poLicy-making, pubLic seruice provision, and ruLe of low for investments and househoLds Modernigation of the Public Administration to improue seruice deliuery PersonneL re- Public sector institu- PartiaLU Achieved Financial Services Exchange of cruitment and tions foLLowing com- The ciuiL seruice Law was drafted and Public Secor Reform internationaL promotions petitiue recruiting and presented to President Lugo in 2012. DeueLopment Policy experience and are based on promoting practices The TA actuity prouided a diagnostic Loan (P117043) (CLs- dialogue among merit and and reporting to the of the state of human capital in the ing Date: 31-Dec-13) IP: practioners professional Ciuil Seruice Secretari- MoH and concrete recommendations. S, DO: S seems to be a shiLLs. at (SFP). A study to present a roadmap to Paraguay PubLic Sector good uehicLe for strengthen pubLic sector saLary and Reform (P3113457) reform initia- BaseLine: 0, only some classification was presented but cLs- (Closing Date: 01-Mar- tiues. consultants (2007) sified as confdentaL, it was used to 11) PoLiticaLLy Target: 40% of public inform internaL poLicy diaLogue with sensitue reform sector institutions the executiue. Knowledge Services areas (such as (2013) Since August 2008, ouer 13,000 Paraguay Enhancing ciuiL seruice promotions and recruPtments haue Public Seor Effectiue- reform) require been decided through competue ness - SFLAC (P120699) time and poLit- processes foLLowing he Secrariat of (FinaL DeLiuery/Com- caL support. PubLic Seruices (SFP) guideLines and pLeaon Summary: TechnicaL methodoLogy. These Letter, howeu- 26-Dec-12) assistance and er, remain uoluntary as there is no dissemination enforcement mechanism in pLace. significantLy supported the PubLic sector institu- Not Achieved dialogue with tions superuised by the 300/ of pubLic sector institutions are the country on Ciuil Seruice Secretari- superuised by the SEP. reform issues at (SFP). and contributed BaseLine: 40% of insti- significantLy to tutions (2008) Bank engage- Target: 80% (2013) ment in the country. A strong - Number of ciuil ser- PartiaLU Achieved knowLedge uants earning below Number of ciuiL seruants earning background minimum wage. beLow minimum wage was reduced was essentiaL BaseLine: 28,000 (2008) to Less than a third, from 28,000 in for the choice of Target: 0 (2013) 2008 n 9,000 in 2010. poLicy actions, simuLtaneousLy combining reLe- uance and polit- ical feasibiLity. More specifocal- Ly, the team's experse in the specificities and chaLLenges of the country was essentiaL for a proper assessmen of the support for reforms across constioiencies and the gauging of poLitcaL rise. (ICR for PS DPL P117043) Fiaca9euce xhneo CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator Status and Euatuation Summary Bank Group Program Lessons Learned I. Governonce and Anticorruption: Strengthening state institutions to improve poLicy-making, pubLic service provision, and ruLe of Law for inuestments and househoLds Modernigation of the Public Administration to improve seruice delivery SOEs finances and operations are trans- PartialLy Achieued Financial Seruices parent and subject to greater scrutiny The Inter-ministerial Council of SOEs PubLic Sector Reform by Gouernment and ciuiL society. (CEP) and the SOEs Monitoring Unit DeueLopment PoLicy (UMEP) were estabLished soon after Loon (111043) (Cps- the presidential eLections of 2013. ing Date: 31-Dec-13) IP: The abiLity to combine CEPs fast t; DO: S inter-institutional. decision-mak?ing Paraguay Energy capacity with the professionaL and Sector Strengthening technicale monitoring of UMEP creat- Project (114971) (CLos- ed a responsue, technicaLLy-sound ing Date: 31-Dec-15) IP: SOE superuisory body. The Board of MU, DO: MU CEP meets reguLarly, and its agenda Water and Sanitation is jointLy prepared by CEP's executiue Modernigation Project secretary and UMEP. (P095235) (CLosing Date 31-Mr-2015) IP: Public Sector Rerorm DeveLopment MU; DO: MU PoLicy Loan By June 2010, aLL SOEs had already Knowledge Services signed their respectiue external audit Paraguay Enhancing contracts with independent audit PubLic Sector Effectiue- firms according to procedures estab- ness - SFLAC (P120699) Lished by UMEP and the National (Final DeLiuery: 26-Dec- PubLic Procurement Low. Eight SOEs 12) haue concLuded and pubLished their PY Public Sector NLTA reports. (P117046) (CompLetion The Energy Sector Strengthening Summary: 30-Jun-10) Project has reuiewed draft TaRs for the deuelopment of the institutional assessment of the electricity sector. To support the SOE monitoring the AAA actiuity prouided: training in superuision of SOEs with the Gouern- ment of Uruguay; Regionalg Wor- shop on Superuision of SOEs in Latin America; International Seminar on Corporate Gouernance of SOEs; Com- paratiue Study on the Management of SOEs in Latin America and the experience in Paraguay; an anaLysis of the Paraguayan oil industry and its national oil company PETROPAR. Increased Rate of timeLy pay- Partiall Achieved Financial Services quaLity of ments reaches 60% for The MoH estabLishes cLear ruLes with PubLic Sector Reform basic seruice basic seruices prouided respect to transfers and payments DeueLopment PoLicy deLiuery by to the state by SOEs between SOEs and the Centraly Loan (117043) (Cs- SOEs (eLectricity, water, and Administration. In 2010, CEP-desig- ing Date: 31-Dec-13) IP: teLecommunication, noted members from of an inter-in- 5, DO: S (The present (BaseLine 2008: 27%). stitutional technical commission Paraguay Energy outcome was (CTI) caLculated accrued debits and Sector Strengthening added due credits maintained between the SOEs Project (114971) (Cs- to a Lack of and Central. Administration. Rate of ing Date: 31-Dec-Cd) IP: outcome in timeLy payments of SOE-prouided MU, DO: MU the CPSPR's seruices jumped from 27% in 2008 to Water and Sanitation reformed 51% in mid-2010. Moderni3ation Project matrix) (P095235) (CLosing Date: 31-Mar-15) IP: MU, DO: MU wae adSoiato CPSCR Annex A. CPS Results Framework CPS outcomes CPS Outcome Indicator Status and Euauation Summary Bank Group Program Lessons Learned I. Governonce and Anticorruption: Strengthening state institutions to improve poLicy-making, pubLic service provision, and ruLe of tauw for investments and househoLds Modernigation of the Public Administration to improve service delivery Couerage of ESS- Not Achieved AP water access as ESSAP and ANDE are receiuing measured by the enhanced suppart from Bank percentage of house- Procurement SpeciaList and cansul- holds in urban areas tant an technical issues and utiLity with access to water transformatian ta prepare bidding has increased to 89.2% documents. Same kind afintensiue (baseLine 2010: 79.4%). support is required for Financial Man- agemen They aLso receiue appropri- ate Oduciary management af pubLic inuestments. In both cases, cantrat implementation is underway after strong deLays. Under camponent 3 of the project, the engagement has enabLed access tosafe water and sanitation seruices to around 17,500 peapLe, of wham 6,200 are indigenous peopLes whoa receiued access to sanitation seruices. Number of haurs of Not Achieued pawer outage as mea- There is na up-to-date information sured by haurs/year an this indicator. The physical wors per user has decLined that will bring resuLts haue not yet to 11 hours (BaseLine started. 2010: 36.3 hours/year). II. Pouerty: Improving inuestments in the sociaL sectors (heaLth and education) and focusing pubtLec spending on fighting extreme pouerty Employment Generation and Fighting Pouerty (especially in light of the effects of the globaL financial crisis on Paraguay) Focus the Increase the number of Achieued FinanciaL Seruices Limited coun- beneficiaries (house- Target surpassed as programs bene- Paraguay PubLic Sector try capacity holds) for the condi- ftted 98,000 househoLds Liuing in ex- Reform DPL (P113457) and financial tional cash transfer treme pouerty (Tekopord: 83,000 and (CLosing Date: 01-Mar- resources on program-Tekopord PRO-PAIS I1: 15,000). Between 2007 11) programs and PRO-PAIS II. and 2010, pouerty rates decLined to Baseline: 13,679 (2008) 19.4% (extreme) and 34.7% (oueraLL), KnowLedge Services Target: 83,100 (2013) but high growth in 2010 Left extreme PY Equity Assessment pouerty rates practically unchanged and Pouerty Support for that year. AAA (P3132332) (Final. Imru areigo PriLUAchieved DeLiuery/CompLetion Improve targeting of PrtllSumy:1-a14 social expenditures on Targeting conditional cash transfers Social Protection cash transfer pro- signifcantLy improued as beneocia- NT (P87)(in grams. ries for the Tekopord program were NT P087 Fnl identified by a two-foLd approach of eLiuery: 20-Dec-10) geographic targeting and a door-to- NLTA Programmatic door census. Pury1 P253 The Ban 0 is supporting the Gou- ( n e iuerP/3533 erment in updating the targeting (Fein DeSuemry:m instrument. The TA for the Te anopord p0tinSuma program is stiLL underway. 1-a-3 The Ban heLped design a targeting Paraguay HD Pro- instrument for the AduLtos Mores grammatic Actiuity program. Due to the change in gou- (P146699) (Final DeLiu- ernment the new targeting instru- ery/Prog. CompLetion ment was neuer impLemented. Summary: 12-Jun-15) Fiaca9Srie CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned II. Pouerty: Improving investments in the socioL sectors (heaLth and education) and focusing pubLic spending on fighting extreme pouerty Employment Generation and Fighting Poverty (especially in light of the effects of the global financial crisis on Paraguay) RetooL institutional capacity to address PartiaLLy Achieued KnowLedge Seruices (i) Key to haue fuLL other important pouerty concerns, par- A pouerty assessment (NLTA) NLTA Programmatic Gouernment owner- ticuLarLy those arising from the crisis, was conducted to anaLyZe the Pouerty 11 (P123533) ship of the process and uia decentraLi3ed mechanisms, such as impact of rising inequaLity and (FinaL DeLiuery/Com- strong reLatonships community-driuen projects. food prices on nationaL pouerty pLetion Summary: with counterparts. Suc- rates. It also presented the new 10-Mar-13) cessfuL outcomes, and pouerty methodoLogy, anaLyged the possibiLity to buiLd the determinants of pouerty, an- PY SociaL Protection on them, require that aLy3ed trends in the urban Labor NLTA (P1068T7) (FinaL counterparts be fuLLy market, and analy3ed the possible DeLiuery: 20-Dec-10) inuoLued and trained pouerty impacts of a (simuLated) in the process--as is expansion in monetary transfer PY Equity Assessment the case in the reuision programs (both CCTs and the new and Pouerty Support of the pouerty meth- non-contributory pension Law). AAA (P132332) (FinaL odology. This slows DeLiuery/CompLetion the process down, but The Equity Assessment in Para- Summary: 15-May- assures quality, fuLL guay aimed to contribute to an 14) Gouernment ownership, understanding of the patterns be- and strengthened ca- hind the weak Linkages between pacity throughout the pouerty reduction and economic institution. Strong and growth, and thus the Limited fuid communication capacity of the economy to create also ensures continuous a strong middLe cLass, under the engagement. hypothesis that equity-enhancing (ii) The importance of policies shouLd be conceptual- a phased strategy that i3ed within a broader discussion buiLds continuaLLy on regarding the pattern of growth. preuious successes. Programmatic woa is important, especiaLLy in the slow but I?ey issues of building capacity in gouernment institu- pans, such as NationaL StatisticaL Office. (iii) CLient engagement is cruciaL but can be compLicated as coun- :rparts can change quickLy. The impeach- ment of Paraguay's president did not affect she NatonaL Statisti- caL Office (maintain- ing the wor on he pouerty methodoLogy); howeuer it did change counterparts in the Hacienda Ministry and the STP. This leads to deLays and more costs on rebuiLd reLationships and wo programs. th rcesd9n u CPSCR Annex A. CPS Results Framework CPS outcomes CPS Outcome Indicator Status and Euauation Summary Bank Group Program Lessons Learned II. Pouerty: Improving investments in the sociaL sectors (heatth and education) and focusing pubLic spending on fighting extreme pouerty Employment Generation and Fighting Pouerty (especially in light of the effects of the global financial crisis on Paraguay) Deuelop actiue Labor market policies Achieued Knowledge Seruices to prepare the country, and especiaLLy The Bank helped the Ministry of SociaL Protection PoLi- uulnerabLe groups, to respond to the Justice and Labor with (i) the design cy Dialogue 10 effects of an economic crisis that may of the Temporary Employment harm employment. Program "Nambapoo Paraguay," which, howeuer, neuer went beyond the piLot phase; and (ii) the reuiew of the National EmpLoyment Strategy. The program has been designed and is ready to be implemented. Integrated Agrarian Reform, and reactiuation of small-scale (household) agriculture Increase Land use change de- Achieued FinanciaL Seruices national tection completed for For those areas were major defor- PY PRODERS Sustain- agricuLturaL major hot spots. estation or urbani3ation was sus- able AgricuLture e data quality in peced to haue taken place uarious RuraL DeueLopment order to refine assessments were conducted to (P088799) (Closing gouernment determine their current state. Date: 28-Dec-17) IP: interuentions. Land market analysis Achieued MS, DO: S (The present athpoted for major Various studies on the relationship Knowledge Seruices outcome was First between Land tenure and pouerty Paraguay and dia- added due Frtround of no- were compLeted and deLiuered to the Logue (P123711) (Final oa Lacdof tional diaLogue on releuant authorities. DeLiuery/CompLetion outcome in euidence-based Land Summary: 16-Dec-13) he CPSPR's policy compLete. AAA PY Equity Assess- reformed First round of na- Achieued ment and Pouerty Sup- matrix) tional diaLogue on Broad -based stahehoLder support port (P132332) (Final euidence-based Land achieued for euidence-based Land DeLiuery/CompLetion poLicy compLete. policy options, to facilitate more en- Summary: 15-May-14) uironmentally and socially sustain- NLTA Programmatic abLe agricuLturaL growth and urban- Pouerty 11 (P123S33) esation. Paraguay Land Assessment (FinaL DeLiuery/Com- focusing on Land use and Land tenure pLetion Summary: dynamics from a maret perspectiue 10-Mar-13) Launched mid-2011. PY PubLic Sector An update on the forest Land couer NLTA (127499) (FinaL within he AtLantic Forest biodiuersity DeLiuery/CompLetion corridor, Located in eastern Paraguay, Summary: 20-Mar-13) was completed in 2013, including a Conseruation of Biodi- Landscape-scaLe description of the uersity and SustainabLe forest remnants, and a descripon of Land Management the correLation between the distri- in the Atlantic Forest bution of he forest remnants and of Eastern Paraguay indigenous peoples' Lands. (P094335) (Closing Dpe: 12-Apr-16) GEO: U, IP: MS 9ihnteALni oetboiest CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned II. Pouerty: Improving investments in the socioL sectors (heaLth and education) and focusing pubLic spending on fighting extreme pouerty Integrated Agrarian Reform, and reactiuation of small-scale (household) agriculture Launch Launch program to Achieued PlUs with Lim- integrated prouide integrated As of end-2013, 150 neighborhood ted experience agricuLtural support to the ruraL deueLopment committees were estab- in trritoriaL support pro- poor in San Pedro and Lished, together with 40 indigenous extension work grams for the Caagua3u. community organi3ations. shouLd allow rural poor BaseLine: 0 (2008) [or extra time Target: 300 communi- 143 micro-watershed participatory on their work (The present ties and 60 indigenous management pLans are being impLe- pLans to deueLop outcome was communities (2013) mented. and pilot their added due sub-project to a Lack of 4600 small farms haue seen their manuaLs, and outcome in producton increase by 30%. It is take aduantage the CPSPR's expected that PRODERS will beneft of the Lessons reformed more than 9,150 poor famiLies by the Learned by matrix) end of FY14. other projects operating in Number of sub-projects granted by simiLar areas, PY BIO: 0 sociaL contexts, and under simiLar fiduciary conditions. FormaLi3e Increased number of Not Achieved FinanciaL Services; In projects that Land tenure indigenous commu- Through PRODERS one indigenous PY PRODERS Sustain- might affect for indigenous nities with formal community has obtained formal Land abLe AgricuLture e indigenous communities. property titles. titLes and 20 are being prouided sup- Rural Deuelopment peopLes, it is (The present BaseLine: 0 (2008) port to haue their tenure reguLari3ed. (P088799) (CLosing aduisabLe to outcome was Target: 30 (2013) PRODERS aLso fnanced micro-catch- Date: 8-Dec-17) IP: MS, inuoLue the added due ment actuities in indigenous DO: S national indig- to a Lack of communities to increase agricultural Water and Sanitation enous peopLes outcome in producton and productiuity. Moderni3ation Project institions as the CPSPR's The We S projec is currentLy working (P095235) (CLosing part of the proj- reformed with indigenous communities and Date: 31-Mar-15) IP: ect's gouernance matrix) has increased couerage of WSS. MU, DO: MU or aduisory strus2ures in or- der to win their support when deaLing with euentuaL cLaims or confLicts. Howeuer, their inuoLuement might require some leueL of strengthening both in terms of prouision of resources and capacity building. 9s CPSCR Annex A. CPS Results Framework CPS outcomes CPS Outcome Indicator Status and Euauation Summary Bank Group Program Lessons Learned II. Pouerty: Improving investments in the sociaL sectors (heatth and education) and focusing pubLic spending on fighting extreme pouerty Increase enrollment rates and quality of secondary education Improue eui- Ensuring basic con- PartiaLL9 Achieved KnowLedge Services dence-based ditions in aLL pubLic The GOP requested WBG assis- Improue Eui- decision-mak- schooLs (primary and tance ta deueLop a methadaLagy to dence-Based Deci- ing within the secondary) identify the mast impartant needs sion-Making within the Ministry of Designing on effectiue af the schoL system in arder ta heLp Ministry af Educatian Education on: strategy to enhance priaritiZe expenditure based an a set af Paraguay (P129179) teachers' quaLity af benchmarus and a diagnastic af (FinaL DeLiuery/Cm- current teachers' policies, together pLetion Summary: with a plan for improuing teachers' 30-Sep-13) qualifications (pre and in seruice Paraguay HD Pra- training). grammatic Actiuity The actiuities had been deueloped (P146699) (FinaL DeLiu- with a workshop. ery/Prag. CampLetian Summary: 12-Jun-15) Increase access to water and sewerage serKices for the entire population, including indigenous populations Increase cau- Using sanitatian sys- Not Achieved FinanciaL Services erage af water tems in the Asunci6n The Water and Sanitatian praject is Water and Sanitation and sanitatian metrapoLitan area: appraued and effectiue, but is suffer- Modernigatian Praject system in ru- Target af 15,000 new ing impLementatian deLays. ResuLts (P09S235) (CLasing raL and urban famiLies by 2013. sa far are that the ruraL camponent Date: 31-Mar-15) IP: areas; and Using water suppLy af the praject has deLiuered 30 ruraL MU, DO: MU ininaarticvular,om increascuLte systems in ruraL and pater distributian systems, increas- aareas: ing potabLe water access ta araund numberaof indgenausm 700 peapLe; the basic sanitatian additionaL famiLies by 2013. eLement wiLL increase access ta 7,000 famiLies (auer peopLe in ruraL cammunities. 2007). Using basic sanitation DAPSAN initiatiue ("mesa de coardi- in ruraL areas: Target af naci6n") ta impraue sectar stake- 4,000 new famiLies by haLders' caardinatian is pramising. 2013). MeanwhiLe, Water and Sanitatian praject requires better camrdinatian with DAPSAN. TaLk~s an ESSAP cancessian cantract are pragressing welL Increase access to basic health services of good quality Reduce aut- PaLicy af free drugs Not Achieved KnowLedge Services; of-pockiet designed and impLe- PoLicy af free drugs designed and Paraguay HeaLth Sec- payments an mented impLemented. tar Medium and Lang drugs and in- WTraoshrps an pubLic sectar Lng- Term Visian: BuiLding crease access term heaLth priarities campLeted. a HeaLthy Future ta basic heaLth Findings and recammendatians AAA (P111929) (FinaL seruices, detiuered ta cLient. DeLiuery/CompLetin especiaLLy FamiLy HeaLth Units Achieued Summary: 12-Apr-13) far the paor Pragram designed and Family health Units (FHUs) houe and thase in under been designed and impLemented. As remate areas. impLementatian af 2012 auer 704 haue been created. SaciaL heaLth determi- Achieved nants are anaLyed ta Studies oan the determinants ofociaL design heaLth heaLth in the cauntry were deLiuered paLicies ta the autharities within the then named "Ministeria de SaLud" of the cau ntry. Fiaca9Srie CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned III. Growth with IncLusion: Fostering growth with a focus on empLoyment generation and on improving income distribution, with- out destabitiging the country's macroeconomic framework, and in on enuironmentally friendLy manner. Appropriately responding to the global financial crisis, while safeguarding macroeconomic and financial stability Adoption of a The oueraLL fiscal baL- PartiaLU Achieved FinanciaL Services Strong nationaL own- countercycLi- ance to moue from sur- OueraLL PscaL deficit was 1.7% in 2012 PubLic Secor Reform ership proued to be o caL fiscal poLi- plus to deficit, but to and 1.9% in 2013. DeueLopment Policy cruciaL eLement of o cy to mitigate auoid sharp increases Adopton by the LegisLatiue Branch of Loon (P117043) (CLs- successfuL operation. the impact of in the debt/GDP ratio the emergency, anti-crisis, package ing Date: 31-Dec-20) IP: The strong commitment the crisis on the auerage deficit of $300 miLLion which is co-f- S, DO: S with the reforms is the most uuL- should be around 1% nonced by IADB, CAF, Jopon, ond euident by the fact that nerable pop- of GDP (2009-2011) the World Bank. An anti-crisis pLan KnowLedge Services despite the poLitcaL uLation, but was Launched, helping the country's Paraguay PubLic instabiLity during the maintaining economic recouery in 2010 and neu- Expenditure Report project's impLemen- a sustainable traLiging the effects of the crisis on (P127351) (FinaL taton, changes were fiscal stance pouerty rates. DeLiuery/CompLetion made and outcomes in terms of Increased tax/GDP PartiaLU Achieved Summary: 28-Oct-13) achieued. public debt to ratio Tx/GDP rato reached 13.5% in 2010, MTDS - Paraguay Sustained engagement GDP. BaseLine: 11.9% (aug surpassing the set target and allow- (P124439) on the part of the Bank 2004-08) Target: 13.0% ing the Gouernment to maintain a Paraguay PubLic Sector contnues to be critical (2013) positiue oueraLL fiscaL baLance euen Reform (P3113457) to effectiueLy support during the crisis. The ratio was 11.5%/ (Closing Date: 01-Mar- reform processes ouer in 2013. 11) the medium and Long PY - RAS Payment term. The uninterrupted Ratio of audits of Large PartiaLL Achieved Systems #2 (P122533) reLationship between tax payers that result The Subsecretara de Estado de Trib- (FinaL DeLiuery/Com- the Bank and the in additionaL assess- utaci6n (SET) has strengthened its pLetion Summary: counterpart euen at ment exceeds 70%. audit capacities for Large taxpayers 23-Jun-13) times when significant through: (i) the issuance of a resoLu- reform was not: feasibLe (we wiLL assume that tion by SET and the Superintendencia Laid the groundwork for the target date is 2013 de Bancos to aLLow for the audit of an effectiue partnership since no informa- fnancial institutions cLassified as when the opportunity tion was prouided in Large taxpayers; and (ii) the impLe- was presented. CPSPR) mentation of a training program for Supporting a poLicy auditors from the Large taxpayers area that count:s on t:he unit: (DGGC). cLear commitment from The ralo of audits of Large tax payers the Gouernment aLLows tha resuLts in additionaL assessment for increasingLy cam- was 15% in 2010. pLex and impactfuL re- forms. In particuLar, pihe Gouernment's focus on Large taxpayers shows its commitment o shift from improuing basic core processes to sec- ond-generation reforms. and the program's suc- cessfuL support of these measures exhibits the Bank's adequacy as a deueLopmen partner in the poLicy area. (ICR for PY PS DPL P117043) in 2013 CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned III. Growth with IncLusion: Fostering growth with a focus on empLoyment generation and on improving income distribution, with- out destabitiging the country's macroeconomic framework, and in on enuironmentally friendLy manner. Appropriately responding to the global financial crisis, while safeguarding macroeconomic and financial stability UtiLi3ing Increase public inuest- PartiaLL Achieved KnowLedge Services the fiscaL ment/GDP ratio. PubLic inuestment/GDP reached 3% PY Equity Assessment headroom BaseLine: 1.7% in 2008 in 2013. and Pouerty Support to increase Target: 3.5% in 2013 The share of sociaL programs in (P132332) (FinaL targeting of Increase couerage for the oueraLL budget expenditures DeLiuery/CompLetion public spend- the conditional cash increased fram 47.8% in 2006-2007 Summary: 15-May-14) ing, away transfer program ta 50.8% during the crisis while cau- NLTA Programmatic from wages BaseLine: 2008: 18,700 erage of sociaL protection programs Pouerty 11 (P123533) and other Target: 75,000 in 2013 increased more than six-foLd. SociaL (FinaL DeLiuery/Com- recurrent spending was 45.7% of oueraLL bud- pLetion Summary: spending and get expenditures for 2012. 10-Mar-13) toward capitaL and sociaL protection items. Increase couerage for Achieved Paraguay HO Pro- the conditionaL cash A Social Economic Unit was created grammatic Actiuity transfer program within the MoH to support the design (P146699) (FinaL DeLiu- BaseLine: 2008:18,700 and euaLuahon of social programs. ery/Prog. CompLetion Target: 75,000 in 2013 CCT programs beneciaries reach Summary: 12-Jun-15) 98,000. Paraguay PubLic Sector Reform (P113457) (Closing Date: 01-Mar- 11) PY Social Proteccon NLTA (P106877) (Final DeLiuery: 20-Dec-10) Mouing toward a more sustainable pattern of growth, based on greater diuersification of products and external markets; sup- porting insestments in infrastructure and human capital, and improuements in the inuestment and business climate, that will unambiguously move the country in that direction in the short to medium term Launch inuestment program to improue Not Achieved FinanciaL Services; To tansLate the recent the transmission and transformaton Energy Sector Strengthening ProjeP Paraguay Energy growth of the economy capacity, as weLL as improuement of the effectiue. Preparation of Ikey docu- Sector Strengthening of Paraguay into an system Losses. mentation is weLL aduanced to begin Project (P114971) (CLos- enuironmentaLly sus- impLementation of work~s. Disburse- ing Date: 31-Dec-15) IP: tainabLe one, the new ment is Less than 1%. MU, DO: MU partnership must focus on aiding institutional reforms, buiLding Law enforcement capabiLi- ties, and impLementing cross-sectoriL poLicies. Improue the BaseLine: 25% of paued Achieved Financl LiServices quaLity of road network~ under 1,218 hiLometersp of roads are main- Road Maintenance road infra- routine maintenance in taied through performance-based Project (P082026) structure 2007 conacts. Also, an estimated 50 per- (Closing Date: 28-Feb- though the Target: 50% by 2013 cent of the paued road networ was 14) 9P: MS, DO: MS increase of a m under routine maintenance in 2010. of road under KnowLedge Seruices systematic PY Transport Sector road mainte- Assessment (P10682 ) nance. (FinaL DeLiuery/ACS: 26-Nou-08) 9oigtwr oessanbepteno rwh ae ngetrdvriiaino rdcsadetra akt;sp CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned III. Growth with IncLusion: Fostering growth with a focus on empLoyment generation and on improving income distribution, with- out destabitiging the country's macroeconomic framework, and in on enuironmentally friendLy manner. Moving toward a more sustainable pattern of growth, based on greater diversification of products and external markets; sup- porting investments in infrastructure and human capital, and improvements in the investment and business climate, that will unambiguously move the country in that direction in the short to medium term Improue no- Achieue a 10-foot Not Achieved FinanciaL Seruices tionaL trans- operational depth and The strategy to deueLop the institutin- Paraguay: Support for the port Logistics 24-hour nauigation oL framework of riuer nauigation (ond Design of Riuer Noulgo- network on 90% of the year in the roLe of the ANNR, the state's port tion Concessions-Phose 11 waters of Paraguayan outhority, in this framework) was not (P122325) (FinaL DeLiuery/ (The present riuers and shared juris- deueLoped. ACS: 28-Mar-12) outcome was diction in the Paraguay CompLeted the necessory study to as- Rood Mointenonce Projec added due and Parana riuers. sess the conuenience of impLementing (P082026) (CLosing Dote: to a Lack of the dredging and maintenance of the 28-Feb-14) IP: MS, DO: MS outcome in riuer through a pubLic works, PPPs or the CPSPR's other contractual arrangement IFC inuestment in Logistc reformed CompLeted the technicaL studies to im- company for riuer trans- matrix) pLement the dredging of the Paraguay portation. riuer. A feasibiLity study on concessions for riuer nouigation wos prepared in 2011. Reduce transport cost Not achieved by 30% through dredg- No actuities were undertaken to reduce ing of the Paraguay riuer nouigation costs. riuer. The ruraL roads project (P082026) striues to reduce the amount of uehicle break~downs. But no measurement is possible due to the fct thot "some indi- cators are designed in such a way thaot baseline, ond ex-post uaLues need to be compared to measure the deueLopment impact with no intermediate ualues measured" (ISR for P082026). Sources of growth and overall competitiveness Competitiueness stratCgies and action PartiaeLU Achieted FinanciaL Serices pLans agreed upon by stakehoLders Preliminary methodoLogy agreed PY PRODERS SustainabLe (through a pubLic-priuate dialogue upon with the Gouernment and piLot AgricuLture and RuraL mechanism) for piLoA sectors/regions. selection process initiated for technicaL DeueLopment (P08899) assistance to deueLop pilot competiue- (CLosing Dote: 28-Dec-1) ness strategies and craen pLons. DO: MS;,P S IFC's ongoing financiaL Launch diaogue on sources of growth PartiaLU Achieved sector operations. (incLuding the potentiaL roLe of the mod- Participory diagnostic prepared ernigation of agricuLturaL enterprises), on major constraints to sustainabLe ICs ongoing operaoions in growth. Logistics. A muLti-sectoroL work~shop was heLd on Nouember 2011. where B"omn and IFCs inuestment in seLected SociaL Ministries discussed the issues agribusiness companies. of growth, pouerty reduction, and incLusion. KnowLedge Servicesm PY NLTA Programmatic Pouerty 11 (P123S33) (FinaL DeLiuery/CompLetion Sum- mary: 10-Mar-13) upnwihth oermntad9io CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned Sources of growth and overall competitiveness Business BaseLine: 291 days to Achieued Paraguay IncLusiue Cor- cLimate is deaL with construction Business climate improued by making petitiueness (P126568) improued by permits (2009) it easier to obtain a construction per- (Final DeLiuery/CompLetion reductions in Target: 137 days to deal mit. In 2010. the creation of a "single Summary: 14-Nou-13) red tape. with construction per- window" for building permit approuaLs Access to Finance - Factor- mits (2013) and associated regulatory changes ing (P144971) (Final DeLiu- reduced the time to obtain a building ery/CompLetion Summary: permit from 63 to 21 days in Asuncion. 31-Dec-13) AgricuLtural Riso As- sessment Phase I (under deueLopment) PY VoLatiLity AnaLysis (P3143809) (Final. DeLiuery/ CompLetion Summary: 13-Mar-14) Safeguarding the environment DecLine in unsustainable forest man- Not Achieued FinanciaL Seruices agement practices and reduction of the Agreement with OAS and Instituto de Conseruation of Biodi- expansion of the agricuLtural frontier as Derecho y Economia Ambiental. (IDEA) uersity and SustainabLe a result of the impLementation of PES in to promote payment for ecosystem Land Management in the piLot areas. seruices and sustainable agriculture. ALantic Forest of Eastern Initial delay because of the InaLigation Paraguay (P094335) (Cos- of the Legal documentation. ing Date: 12-Apr-16) GEO: U, IP: MS Strengthening of the national capacity Achieved to enable the deueLopment of CLean De- CompLetion of the Carbon Finance ueLopment Mechanism (CDM) projects Assist Country Work Program. Two and other mitigation actiuities. workshops and Pue technical studies were successfuLLy carried out to assess the Low carbon potential in reLeuant producAiue sectors. 9n P491 FnlDLu CPSCR Annex A. CPS Results Framework CPS Outcomes CPS Outcome Indicator status and Euauation Summary Bank Group Program Lessons Learned Safeguarding the environment EstabLishing a bioLogicaL corridor and PartiaLLy Achieued In projects that might affect indig- encouraging sustainabLe agricultural FoLLowing a uery stow project enous peoples, it is aduisabLe to practices. implementation startup, an inuoLue the National Indigenous extension of the closing date was PeopLes institutions as part of the granted in March 2014. The cur- project's gouernance or aduisory rent closing date is ApriL10, 2016. structures in order to win their As of May, 2014, the first project's support when dealing with euen- actiuities were already showing tual cLaims or confLicts. Howeuer, firm outputs in Line with the their inuoLuement may require expected results. Project impLe- some LeueL of strengthening both mentation has been improued by in terms or prouision of resources a more strengthened Project Im- and capacity building. pLementation Unit and by an ac- Although implementation of tiue coordination wi th Secretary projects with bi-national entities for the Enuironment ( Secretaria might not require going through del Ambiente SEAM). Howeuer, usual formal procedures before the project has not yet made an effectiueness (e.g., The LegisLatiue impact at the outcomes LeueL Branch approual), it is aduisable The project wiLL be restructured to promote the use of simpLe to adjust its resuLts framework in designs, auoiding schemes with order to deliuer the project PDO in seueraL executors and unneces- the new timeframe. The dia- sary formaL complexities; this Logue with representatiues from wiLL heLp to reduce coordination indigenous communities in the demands. project target area has continued The use of bi-nationaL entities as and there are ongoing discussions executants may heLp to ensure a related to their participation smooth auaiLability of co-funding in the project in the context of and counterpart human resourc- the project's Indigenous PeopLe es, which are of great uaLue for Strategy. The Instituto Nacional project execution. de Asuntos Indigenas (INDI) has The Lach of Long-term policies, approached the project to request grounded on wide politicaL participation and to offer support. consensus, combined with some Strengthening the institutional capacity PartiaLLy Achieued degree of political instability can of Ministerio de AgricuLtura y Ganaderia The PIU has conducted a key seuerely deLay project implemen- (MAG) and SEAM to improue manage- training actiuity on forestry man- tation. ment capacity. agement issues Led by the Centro Actions aimed at strengthening Agron6mico TropicaL de Inesti- institutional capacities may gci6n y Enseiop (CATIE) from proue pointless when the in- Costa Rica. This has inuotued tended beneficiaries do not haue more than 100 participants from clear and pre-deined priorities, Itaip6, SEAM, and other stake_ or Lach certain "basic needs." In hoLders in the project area of these cases, extra and sustained inLuence, as nett as experts from hand-holding may be needed, as PRODERS w weLL as great Rlexibility to adapt to changing, short-term require- Strengthening the NationaL Protected No Achieued ments. Areas System. No actiuities haue been under- taken. CPRSC Annex B. Planned Lending Program and Actual Deliueries CPS PLans (2009-2013) CPS Completion Report Project US$m Projects Status US$m DPL 1 (FY09) 100 Public Sector Reform Deuelopment Policy Loan Approued 100 (P117043) DPL 2 (FY10) 50 Public Sector Reform Deuelopment Policy Loan Approued 100 (P113457) DPL 3 (FY12) 50 Dropped Land Access (FY10) 35 Dropped Education (FY10) 30 Dropped Safety Nets Operation (FY11) tbd Dropped ELectricity (FY10) tbd PY Energy Sector Strengthening Project (P114971) Approued 100 IFC Barge Project IFC Trade Lines Additional ActuaL Projects PY Water and Sanitation Sector Modernigation Approued 64 (P095235) T9oL 265 364 CPSCR Annex C. Deivered AAA (FYO9-14) Fiscot Netuwork ResponsibLe Product Project ID Project Short Name Year Code Unit Acronym Line 1 2009 PREM LCSPE EW P108545 PY SCL Mercosur Trade Study 2 2009 SDN LCSTR EW P106825 PY Transport Sector Assessment 3 2010 PREM LCSPP EW P101174 PY Programmatic Pouerty 4 2010 FPD LCSPF TA P110984 PY (FBS) Payments System 5 2010 PREM LCSPE TA P119925 PY ImpLications of trade Liberai3ation 6 2010 PREM LCSPS TA P117046 PY Public Sector NLTA 7 2010 HDN LCSHS-DPT TA P106877 PY Social Protection NLTA 8 2011 PREM PRMED EW P124439 MTDS - Paraguay 9 2011 FPD FFSFP EW P121994 FSAP Update Paraguay 10 2011 SDN LCSTR TA P122325 PY Riuer PPP Study - Phase 2 11 2012 FPD LEGPS EW P123006 Paraguay ICR ROSC 12 2012 PREM STR TA P116759 StAR - Paraguay TA 13 2012 SDN LCSEN TA P106199 PY CDM TA for Paraguay 14 2013 HDN LCSHH EW P111929 PY HeaLth Sector Mid and Long term uision 15 2013 FPD LCSPF TA P122533 PY - RAS Payment Systems #2 16 2013 PREM LCSPP TA P123533 PY NLTA Programmatic Pouerty II 17 2013 PREM LCSPS TA P127499 PY Public Sector NLTA 20 2013 PREM LCSPS TA P120699 PY Public Sector Effectiueness 19 2013 HDN - 10 - Namba'po Paraguay and the NationaL EmpLoyment Program 20 2014 PREM LCSPE EW P132352 PY PoLicy Notes (MST) 21 2014 SDN LCSAR EW P123711 PY Land Dialogue 22 2014 PREM LCSPE EW P127351 PY Public Expenditure 23 2014 PREM LCSPP EW P132332 PY Equity Assessment and Pouerty Support 24 2014 PREM LCSPE EW P143809 PY VoLatiLity Analysis 25 2014 SDN LCSAR EW P149948 Agriculture Sector-Wide Risk Assessment 26 2014 FPD LCSPF TA P144971 PY - JIT Access to Finance - Factoring 27 2014 FPD LCSPF TA P131173 Paraguay #10188 Crisis SimuLation Exercise 28 2014 SDN LCSTR TA P129630 PY Infrastructure and Logistic 29 2014 FPD LCSPF TA P126568 PY IncLusiue Competitiueness 30 2014 SDN LCREA TA P117391 PY Building an Accountability 31 2014 HDN LCSHE TA P129179 Improue Euidence-Based Decision-Making 32 2014 FPD LCSPF TA P143926 PY Access to Finance - Factoring 9V ANNEX 3 Monitoring and Eualuation of the CPS FY15-18 Results Framework Results Area 1 - Strengthening (ii) 163,000 individuals and microenterprises accessed to Resilience to Risks and Voltisity microfinance client services by 2018 (2012 baseline: 125,000). Result 1.1: Enhanced agricultural risk management The 163,000 figure represents just the additional reach IFC's clients expect to achieve in total in Paraguay in WBG Result Indicators: the outlook period over the baseline/actual amount of 125,000 in 2012. In terms of measurement, the figure rep- (i) Agricultural insurance penetration rate increased by 15 resents the number of loans outstanding below $10,000 percent by 2018 (2013 Baseline 0.39 percent). to individuals and microenterprises. Agricultural insurance is typically one of many tools that NO 7 percent of farmers with improved access to markets farmers can use as part of their comprehensive strategy and access to enhanced productivity and financial ser- for managing agricultural production risks. It is measured vices by 2078(2013 baseline: 5 percent). by the ratio between agricultural insurance premiums and the agricultural GDP for the same year. Baseline and This figure represents the number of farmers serviced target data sources for the agricultural insurance premi- by IFC clients, and these farmers are expected to benefit ums and for the agricultural GDP are reports from the from (i) improved access to markets, inputs and services; CBR43 For comparison purposes, the EU insurance pene- (ii) improved functioning of markets and services; (iii) im- tration rate is around 1 percent. proved financial outcomes; or (iv) training on practices to improve productivity or promote sustainability" of their Result 1.2: Improued Financial Inclusion farming activities. As of December 2013, 33,000 farmers have been reached (out of a total of 638.59011). The target WBG Result Indicators: for the CPS period is 45,000 farmers. Source: IFC Develop- ment Impact Department. (i) 50 percent of adults with savings accounts by 2018 (2013 baseline: 29 percent). Result 1.3: Improued enuironmental management One of the indicators for the National Financial Inclusion Strategy is to increase the number of adults with savings WBG Result Indicator: accounts in Paraguayfrom 29 percent in 2013 to 50 percent in 2018. Paraguay conducted a Financial Inclusion Survey (i) Improved forest management and conservation prac- (FINDEX) in 2013 which provided the baseline result of tices introduced on an area equivalent to 18 percent of 29 percent. In the same year, the LAC regional average of the current Alto Parand's Atlantic Forest area45 by 2018 adults who have a savings account was 39 percent. Thus, (2014 Baseline: 9 percent). Paraguay has aimed to increase the number of adults who have savings accounts through a number of supporting Despite its ecological importance, Paraguay suffers from policy actions identified in the National Strategy. As part severe environmental degradation. In particular, Par- of the National Strategy Plan, the GoP will launch a new aguay's deforestation rate was until recently one of the survey to track down progress, and will be carried out by highest in Latin America. Deforestation has greatly re- 2017 in order to demonstrate the survey results by 2018. ____________________________________________ 44 Total number of farmers according to the 2013 National House- 43 Both reports are annually published at http://www.bcp.org.py hold Survey. (see: Estadisticas del Sector Asegurador (Insurance Sector Statistics) 45 Total current area of Alto Parana's Atlantic Forest is 1,7002,000 and Anexo Estadistico del Informe Econ6mico (Statistical Annex to hectares. Source: WWF, 2014 (Available at http://www.wwf.org.pyl the Economic Report). quethacemos/bosquenatantico/. 9ie y21 21 aeie ecn) duced both the extent and continuity of Paraguay's re- fl) Total taxlGDP ratio increased from 11.5 percent (2013) maining forest cover. This deforestation, combined with to 14 percent (2018) and the progressivity of the tax sys- further unsustainable land management practices in- ter improved compared to the base year2013. cluding slash-and-burn agriculture, extensive grazing and the practice of mono-cultivation of cotton, and more Baseline data source on total tax/GDP ratio is the Minis- recently soybeans and sugarcane, are also leading to soil try of Hacienda (MoH) with data collected by the Tax Ad- erosion, loss of soil fertility and decreased quantity and ministration Office (SET), and 2018 information will also quality of water resources,-constraining the livelihoods be provided by MoH. Improvement in progressivity will and productivity of farmers within the region. Addition- beevidenced byestimatingtheshareoftaxcollectionvia ally, erosion and siltation is affecting the operation of the progressive taxes to total tax revenue in the base year and country's main source of public revenue, the ltaipO hydro- comparing the same estimation for 2018. The Public Ex- electrical dam. penditure Review (PER) carried out by the Bank in 2013 in- cludes an analysis of taxes by income dleciles and this will By 2018 it is expected that protected areas included in the be used to inform the baseline values. During the imple- project will be strengthened based on the use of the GEF mentation of the CPS, the Bank will carry out an update of Strategic Priority#1 tracking tool46. The target of 310,799 this document using the same methodology in order to ha includes: (i) the area where subprojects are expected to generate the corresponding numbers in 2018. be implemented (2018 target: 120,000 ha - 2014 baseline: 0); plus (ii) the area where private reserves are expected (ii) Progressivity of expenditures in social and infrastructure to be implemented and/or created (2018 target: 124,374 service delivery improved by2018 ha - 2014 baseline: 107,734 ha considering the area of the existing private reserves (Natural Reserve Mbaracayu The PER mentioned above also has a chapter focused on Forest, Morombi natural reserve, Ypeti natural reserve the role of fiscal policy on poverty reduction where pro- and Tapyta natural reserve); plus (iii) the public protect- gressivity of public expenditures is evaluated. This doc- ed areas where the system is expected to be strength- ument includes, inter alia, a review of the expenditures ened (2018 target: 66,425 ha - 2014 baseline 58,000 ha on health and education per quintile that will serve as a including Caazapd national park, 1Nacunday national park baseline for 2013. During the implementation of the CPS, and 6 reserves belonging to Itaip6). Progress towards the the Bank will carry out an update of this document using achievement of this indicator will be informed by Project the same methodology in order to generate the corre- Management Unit through its semi-annual reports with sponding numbers in 2018. data collected a monitoring and evaluation system. 2018 information will also be provided by the Project Manage- Result 2.2: Improued Access to quality ment Unit. Public Seruices for the Rural Poor Results Area 2: Boosting Pro-Poor WBG Result Indicators: Deli(ery of Public Goods and Ser1ices ) 10 percent of urban extreme poor in Asunci6n metropol- Result 2.1: Increased Revenues and itan area benefiting from improved environmental sani- Pro gressivity of Fiscal Management tation services by 2018 (2014 Baseline: 0). WBG Result Indicators: Definition of access to improved environmental sanita- tion services: environmental sanitation refers to access 46 A World BankmWWF Alliance for Forest Conservation and Sus- to an enhanced water and sanitation services including tainable Use ('the Alliance') was formed in April 1998, in response to network sewerage connection ensuring hygienic excreta the continued depletion of the world's forest biodiversity and of for-i est-based goods and services essential for sustainable development. t lin vi As part of its program of work the Alliance set a target of 50 million ronment both at home and in the neighborhood of users. hectares of existing but highly threatened forest protected areasto Coverage is the proportion of people using improved en- be secured under effective management by the year 2005.To evalu- ate progress towards this target the Alliance has developed a simple vironmental sanitation facilities: 57 Km of a rehabilitated site-level tracking tool to facilitate reporting on management effec- secondary distribution water network, 8.4 km of a new tiveness of protected areas within WWeF and World Bank projects. sevcedlveyiprvdby21 sanitation network and 33 Km of new primary sanitation The measures supported in this area are expected to im- collectors in the watershed of Itay. Baseline and target prove transparency and accountability of the GoPs public data will be produced by ESSAP monitoring framework financial management systems, which will contribute to- for key management and service delivery indicators. wards a more efficient delivery of public services as well as increased participation of civil society actors in the (ii) Indigenous peoples with access to sustainable water in- fight against corruption. This indicator will be considered creased from 2.5 percent (2013) to 6.5 percent (2018). achieved if information on budget execution and civil ser- vice salaries is available and updated for at least 70 gov- A rural water system is considered to be sustainable ement agencies (out of 394) at the MoH portal by 2018 when: (a) the system is designed to ensure long-term (baseline:'No'in 2013; target:'Yes'in 2018). supply (designed appropriately for yield of source), (b) it is functioning as intended and delivers the service either (ii) At least 10 new education sector information tools and continuously or regularly, depending on the service level 15datasetsavailable for internal management andpub- selected; (c) a long term institutional, social, technical and lic access by 2078 (2014 baseline: 0) financial mechanism is in place that guarantees operation and maintenance of the system: and (d) the water com- Information Tools will be information and communication mittee has an incentive to carry out its tasks and meet on technological tools that will help the Ministry of Education a regular basis. to better understand and analyze data.These would main- ly include visualizations of key education data sets and Access to a sustainable water is also defined as access to could also comprise the design and development of appli- safe drinking water, which means that the source is less cations for the manipulation of these data. The target for than 1 kilometer away from its place of use and that it is the new information tools would be 10 (3 in year one; 3 in possible to reliably obtain at least 20 liters per member year 2; and 4 in year 3) and while during year one the main of a household per day; sustainable water is water with focus of these tools will be on teacher data, the focus for microbial, chemical, and physical characteristics that tools to be developed during subsequent years will be de- meet WHO guidelines or national standards on drinking termined later. Data sets would be new data or new aggre- water quality. Access to sustainable or safe drinking wa- gations of existing data. Target for new data sets would be ter is the proportion of people using improved drinking 15 additional data sets over the three years C5 each year). water sources: household connection; public standpipe; Datasets for year one will make information available to borehole; protected dug well; protected spring; or rain- the public on, inter alia, FONACIDE and schools eligible water. Baseline data source is a Country Technical Note on for FONACIDE resources, school matriculation, and school Indigenous Peoples' Issues for Paraguay prepared by the infrastructure data. Sources of data for both target values International Fund for Agricultural Development - IFAD47 will be annual reports from the Ministry of Education. 2018 target data will be produced by ESSAP monitoring framework for key management and service delivery in- (iii) At least two social accountability mechanisms under the dicators. Open Government initiative successfully implemented by independent CSOs by 2018 (2014 baseline: 0). Result 2.3: Improved Social Accountability and Transparency The GoP has requested support from the Global Partner- ships for Social Accountability to develop a model for a WBG Result Indicators: civil-society government partnership for a more transpar- ent and accountable implementation of the Tekopord Pro- (i) Open Information Law" fully implemented by least 20 gram. Thereafter, through a competitive process, a grant percent of government agencies by 2018 (2014 baseline: has been provided to a coalition of civil society organiza- 9percent). tions which will create an enabling environment in which citizen feedback is used to solve fundamental problems in 47 The complete report is available at: http://www.ifad.org/en- glish/indigenous/pub/documents/tnotes/paraguay-en.pdf 48 The Open Information Law (Ley 5189/2014) makes mandatory lic institutions. The program includes activities towards the publication of salaries and allowances received by the civil ser- strengthening the Beneficiaries' Voice and Civil Society vice. 9h esrsspotdi hsae r xetdt m Oversight by raising awareness of the benefits of the Te- (i) 130 additional indigenous communities' (representing kopord Program, improving the quality, effectiveness and more than 50percentoflndigenous Peoples in Paraguay) efficiency of the Tekopord program using social account- economic development improved through enhance- ability and gathering information tools, and managing ment of organizational capacity and better-quality liv- knowledge for program transparency, improvement, ing conditions by 2078 (2014 Baseline: 45 communities). sustainability and management. The indicator is then to successfully implement this initiative by the end of 2018. The 130 indigenous communities are considered high Additionally, a social accountability mechanism is expect- priority due to the high incidence of poverty and the de- ed to be successfully implemented as part of at least one gree to which the natural resources on which they depend IBRD Investment Project Financing operation under the for survival are degraded. Enhanced living conditions in- current active portfolio. dude a strengthened community organization", skills for self-governance, and better access to markets and value Results Area 3: Fostering Market chains for their products. Access of each indigenous com- Integration munity to this line of support under PRODERS has been decided based on the Indigenous Peoples Land Access and Result 3.1: Improved Agricultural Natural Resources Use Index50 designed by the project and Productivity and Access to Markets for prepared with the communities and their associations.The Small-holder farmers Indigenous Communities' Development Plans are moni- tored and evaluated annually by means of a participatory WBG Result Indicators: process by project beneficiaries and technicians who sub- mit reports on subprojects implementation to the PMU. (i) Income of 15 percent ofpoor households (out of 130,000) Baseline data sources are reports from the MAG with data in Concepci6n, San Pedro, CanindeyO, CaaguazO and collected under yearly socio economic surveys carried out Caazapd increased by 30 percent by 2018. (2013 Base- by the PMU Monitoring and Evaluation team. 2018 infor- line: G4 million/year). mation will also be provided by MAG based on the afore- mentioned reports and on an independent evaluation of Farmers' net income with and without the project esti- activities with indigenous communities that will be carried mated through annual socio-economic surveys for ben- out as part of the project mid-term and final evaluations. eficiary farmers and control group (2013 Baseline annual income is G4 million). Net incremental income per farmer Result 3.2: Increased private investments could vary from 24 percent to over 100 percent depend- in logistics projects/initiatives and reduced ing on the farmers'initial conditions, the cropping pattern logistics costs and the farmers'own dynamics. Data sources are reports from the Ministry of Agriculture and Livestock (MAG) with WBG Result Indicators: data collected under yearly socio economic surveys car- ried out by PRODERS M&E team. 2018 information will (i) At least two public private partnership transactions in also be provided by MAG. transport/logistics by 2018 (2014 baseline: 0). Background info: The number of 25,500 comes out from The National Development Plan (NDP) gives a special the target of the original loan (50 pecent of 9,150 fami- role to funding infrastructure investments through Public lies) and the target of the Additional Financing (70 per- m cent of 29,850 families).The baseline is 4,600 since is the 49 This means the creation or strengthening of community De- velopment Groups, Micro-Catchment Development Committees, number of families already benefited by the project. The Municipal Steering Committees, and/or Indigenous Associations. For difference (20,900 farmers and their families), represent More information, please see the Sustainable Agriculture and Rural Development Project Appraisal Document (Report approximately 15 percent of the total poor households in 50 The Index measures: (ii) communities' knowledge about the the five Departments mentioned in the indicator (132,000 location of their lands, their confirmed delimitation and legal status -this has been calculated dividing the total number of (includingthe availabilityofland titles), andthelevel of utilizationof lands that are under the communities' name; and (ii) the existence poor in those departments by 4.5 -which is the average of conflicts on the use of the lands in terms of physical occupation, size of a rural household). and the existence of problems with regards to litigation and other types of claims. prcs yprjc eefcaisan ehiiaswosb Private Partnerships (PPPs). The WBG will monitor these transactions during the implementation of the CPS. Tar- get for this indicator will be reached when at least two public private partnership transactions have been suc- cessfully processed under the new PPP law. (ii) Travel time on two 200km segments of roads in select- ed priority Departments (San Pedro, CaaguazO and Caazapd, or similar) reduced by at least 30 minutes by 2018 (Baseline 2014: average travel time for a 200km segment of a national road 3hrs and 20 minutes; target: average travel time for a 200km segment of a national road 2hrs and 50 minutes). The transport sector is an integral part of Paraguay's eco- nomic ecosystem given the country's landlocked con- dition, and its status as a major producer and exporter. National, departmental and tertiary road networks need priority attention in order to improve connectivity of ru- ral populations and production to the main consump- tion centers and export nodes. Travel time is defined as the travel time based on average travel speeds for two targeted segments of 200km of national roads in two De- partments with high level of poor population to be deter- mined. Baseline data sources are reports from the MOPC. 2018 information will also be provided by the MOPC. ANNEX 4 Portfolios of other Deuetopment Partners Deuetopment Bank of Latin America (CAF)* Recent ApprouaLs Project TitLe Commitment Amount ApprouaL Date (US$ miLLion) Support to the Strategic Economic and Social Program 75 2013 Road improuement and reconstruction of the regional integration corri- 222 2013 dors program 500 KV transmission Line Yacyreta - ViLLa Hayes Project 50 2013 Proyecto de Mejoramiento de Cominos VecinaLes y Puentes en 6reas rura- 50 2014 Les, mediante el uso intensiuo de mano de obra Local en La Regi6n Oriental TOTAL 397 Current Program Project TitLe Commitment Amount ApprouaL Date (US$ milLion) Road rehabilitation and pauing of the regional integration corridors, Route 10.0 2005 11 and branches of Route 10 project Complementary Works to the Route 10 program 9.5 2007 Support to the Social and Infrastructure Program - PAISI 85.0 2010 Support to the Interconnected Transmission and Distribution Grid Program 75.0 2012 TOTAL 179.5 GRAND TOTAL 576.5 * Source: CAF field office in Paraguay Inter-American Deuetopment Bank (IDB) Current Program Project TitLe Commitment Amount ApprouaL Date (US$ miLLion) SmaLL and medium enterprise deuelopment 7.9 2001 SociaL Inuestment program II 22.3 2002 Science and TechnoLogy project 6.5 2005 JudiciaL System Strengthening program 6.3 2006 CiuiL Seruice Strengthening program 4.2 2006 ModerniZation of public management of agricuLtural support 31.5 2006 INCOOP institutional strengthening 3.6 2006 Road rehabilitation and maintenance program phase I 134.0 2006 ANDE transmission Line program 69.5 2006 Program "EscueLa Viua" 45.0 2007 Exports support program 10.0 2007 Fiscal management strengthening and modernigation 9.5 2008 National program of rural roads second phase 65.6 2009 Potable water and sanitation for rural and indigenous communities 12.0 2009 FAPEP - Center for reconuersion, PubLic Transportation 4.9 2010 Center for reconuersion, PubLic Transportation 47.0 2010 Center for reconuersion, PubLic Transportation 78.0 2010 National Tourism program 10 2010 National statisticaL system deuelopment - indiuiduals and housing 12.5 2011 Sanitation and water program for Chaco and the Oriental region 20.0 2011 Modernigation of the Banco Nacional de Fomento 5.7 2011 Third program under CCLIP for the financing of AFD 32.0 2011 Third program under CCLIP for the financing of AFD 18.0 2011 Support program for job insertion 5.0 2011 Program for early childhood deueLopment 27.0 2012 Transmission system support program 50.0 2012 Road rehabilitation and maintenance program phase II 51.2 2013 Road rehabilitation and maintenance program phase II 70.8 2013 Inuestment promotion program 10.0 2013 TOTAL 865.1 Inter-American DeueLopment Bank (IDB) - Private sector Current Program Project TitLe Commitment Amount Approual. Date (US$ miLLion) Cementos Tupi 51.8 2011 Banco RegionaL SME Financing Partnership 20.0 2013 Promoting soybean industriaLi3ation in Paraguay 92.0 2013 Sudameris Bank SME Financing Partnership 10.0 2013 Sudameris Bank SME Financing Partnership 10.0 2013 Vision Banco - Low income family housing 2.5 2010 Improuing opportunities for smaLL producers 3.0 2012 Deuelopment of Associatiue pLatforms for access to finance 6.0 2012 Eectroban SAECA: Productiue financing for microenterprises 6.0 2013 Rural microcredit for smaLL producers and househoLds Led by a women .3 2009 program Export model for organic sugar .3 2010 201.8 Indicative amounts for the 2014-2020 Program Sector Amount (mr) % of total Education 85 51% Priuate sector deuelopment 20 12% Social Protection 48 28% Democracy, Participation and Institutional Strengthening 10 6% Support measures 5 3% TOTAL 168 100% European Union (EU) field, improving the participation of private-sector en- tities in policy design, and reducing the administrative The EU is presently finalizing its Multi-Annual Indicative burden for businesses; Program for the period 2014-2020, which is expected to A stable and socially inclusive Paraguay. The support be adopted in the second half of 2014. The strategic ob- in this field will concentrate on the design and im- jectives are to contribute to Paraguay's social, economic plementation of policies that promote a more equal and institutional development, to promote regional inte- wealth distribution, increase social cohesion and re- gration on the South American continent and to develop duce poverty; partnerships for bilateral and global issues of common Strengthening of democratic institutions in Paraguay, interest. The financial and technical cooperation instru- among others by implementing the recommenda- ments (grants) will be used for: tions of the 2013 EUs Election Observation Mission. Human capital development, improving productivity In the area of development cooperation, the EU and its of the labor force and reducing inequality and pover- Member States5 have agreed to start a joint program- ty. The focus will beaon improving access to, and qual- ming process, including a joint analysis and response to ity of, education; coordinate their programming exercises, covering the Improving the business climate, conducive to trade 20m14-2020 period. and investments, strengthening of the policy-making and implementation capacities of institutions in this 51 Including France,Germany, Italy, Spain and the United Kingdom. ANNEX 5 Gender AnaLysis 1. Paraguay has made progress over the last de- Third National Plan for Equality between Women and Men cade in promoting women's empowerment and gen- 2008-201 .51 der equality. However, there are still challenges to be addressed in order to reduce the gender gap in several 4. In terms of gender equality in endowments, spe- dimensions. In preparation of the CPS, the WBG Gender cifically health and education, Paraguay has made Team conducted a review of gender coverage in the port- clear progress but it lags behind LAC averages par- folio, followed by one-on-one interviews with Task Team ticularly in sexual and reproductive health outcomes. Leaders to analyze how gender is incorporated in the With regards to education, the female-to-male ratio in Bank's program in Paraguay. primary enrollment has remained almost the same for the last decade (0.96 in 2000 and 201 1)5 While boys are 2. Legal and institutional framework: Paraguay has slightly favored in primary enrollment compared to girls, ratified major International Human Rights Instru- the gender gap is reversed in favor of girls as the level of ments on the rights on women52 to establish the basis education increases. The female-to-male ratio in second- of a legal framework aiming to protect and promote ary education was 1.05 and the ratio in tertiary educa- women's rights and gender equality in Paraguay. This tion reached 1.31 in 2011. This trend is similar to the LAC includes the American Convention of Human Rights, region, where the gender gap in favor of girls grows as the Convention on the Elimination of All Forms of Dis- well with increasing levels of education (1.07 and 1.27 for crimination against Women (CEDAW), the International female-to-male ratio in secondary and tertiary education Covenant on Economic, Social and Cultural Rights, the for 2011 respectively). Paraguay and the LAC region have International Covenant on Civil and Political Rights, and followed the same trend when it comes to persistence to the Convention on the Prevention, Punishment and Erad- last grade of primary education. In the case of Paraguay, ication of Violence against Women (BeMm do Pard). Over 86.2 percent of female children reached the last grade of the last decade, laws have been amended and new laws primary education, compared to 81.6 percent of boys in have been implemented by the Paraguayan government 2010 (LAC: 85.8 percent of female children versus 81.4 in order to promote women's empowerment and gen- percent of boys, 2010). Similarly, the rate of male repeat- der equality in the country.53 The National Constitution ers is higher than the rate of female repeaters (5.7 percent of 1992 ensures equal rights for all. Specifically, the Con- and 3.6 percent in 2010 respectively) in primary educa- stitution establishes equal rights among people (Article tion as well as in secondary education - although overall 46), equal rights between women and men (Article 48), lower (1.3 percent and 0.5 percent in 2010 respectively). and non- discrimination (Article 88). The Constitution Paraguay performed better than the LAC region in terms also guarantees the protection of women against vi- of adult literacy rate (94.8 percent and 92.8 percent for olence (Article 60) and it ensures equal labor rights for men and women respectively in 2010, compared to 92.2 men and women (Article 89). percent and 90.9 percent for men and women respective- ly in 2011 in LAC). Literacy rates amongst the youth are 3. The Women's Secretariat of the Presidency of even higher - standing at 98.7 percent for girls and 98.5 the Republic was elevated to the rank of a Ministry in percent for boys in 2010, slightly higher than the average 2012. The Ministry designs plans and implements them in the LAC region where it reached 97.3 percent for girls to promote equality of opportunity between women and and 96.8 percent for boys in 2011. men. It currently coordinates the implementation of the 5. Although the indicators for sexual and repro- 52 Observatorio de G6nero de la Corte Suprema de Justica de Par- ductive health have improved over the last decade, aguay - http://www.pj.gov.py/contenido/537-observatorio-de-gen- ero/537 54 Ministry ofWomen (Ministerio de la Mujer) - http://www.mujer. 53 III Plan Nacional de Igualdad de Oportunidades entre Hombres gov.py / y Mujeres, 2008-2017 - http://www.mujer.gov.py/userfiles/file/IIIP- 55 Unless specifically mentioned otherwise, all data in this note Ncl().pdf stem from GenderStats (World Bank). 9iual nsxa n erdciehat ucms Paraguay lags behind compared to the LAC region ployment rate for Paraguay has slightly dropped from 8.8 (particularly in maternal mortality and skilled birth percent in 2006 to 6.1 percent in 2012 and is now below attendance rates). The maternal mortality rate (MMR) the average for the LAC region (8.4 percent in 2011). At has shown an improvement in the last decade. It dropped the same time, female unemployment is higher than the from 110 deaths per 100,000 live births in 2000 to 99 male unemployment rates (3.9 percent, in 2012 for males deaths per 100,000 live births in 2010. 56 However, this in Paraguay and 5.5 percent for males in the [AC region still compares high to the average in the LAC region (80 in 2011) both in Paraguay and in [AC. Moreover, the gen- deaths per 100,000 live births in 2010). Relatedly, the rate der gap increases when unemployment amongst youth of births attended by skilled health staff increased from is analyzed. In Paraguay, the unemployment rate for 77.1 percent in 2004 to 81.9 percent in 2008. However, young girls is 14.6 percent (2011) compared to9 percent Paraguay's rate is still below the average one for the LAC for young males. The [AC average rate for young female region (90.12 percent in 2010). The share of pregnant unemployment is even higher (18.2 percent) - and so is women receiving prenatal care has increased from 94.2 the young male unemployment rate (12.4 percent, 2012). percent in 2004 to 96.3 percent in 2008, a rate now al- However, the female-to-male youth unemployment ratio most the same as the average rate in the LAC region (96.2 in Paraguay exceeds the [AC average (1.62 compared to percent in 2009). The contraceptive prevalence rate has 1.47). Informality" is a common concern in [ati Amen- also consistently increased in the last few years from 72.8 can countries. On average, each country in Lati Amen- percent in 2004 to 79.4 percent in 2008 - which puts Par- ca produces about 40 percent of its GDP and employs 70 aguay close to rates of its neighboring country Brazil (80.6 percent of its labor force informally.60 In Paraguay, 67.9 percent) and above, for example, Colombia (77 percent).7 percent of all women work in the informal sector com- pared to 55 percent of all men. Moreover, the percentage 6. Economic opportunities: Similar to many coun- of women working in the informal sector increases in tries in LAC, despite women's achievements in educa- rural areas (90.2 percent of all women compared to 76.7 tion, challenges still persist regarding their economic percent of all men). 6I While the informal sector gener- opportunities. They participate less in the labor market, ates jobs, informal workers typically lack social protection earn lower wages, and suffer from higher unemployment such as worker benefits and health insurance. Additional- and informality rates compared to their male counter- ly, informal workers perform their duties under irregular parts. In Paraguay, women have made clear progress in and casual contracts and are paid lower wages than in the labor force participation reaching 53.8 percent in 2012, a formal sector.62 The gender wage gap remained basically rate higher than the average for the LAC region (51.2 per- the same over the last decade: While women were mak- cent in 2012). Female labor force participation for young ing 69 percent of their male counterparts in 2000, they women (percentage of female population aged 15-24) is are now making 70 percent (2010, data from P[B 2012). also higher (49.7 percent) than the average for the LAC region (42.6 percent). The female-to-male labor force 7. Manifestations of the lack of agenCy63 form some participation ratio was 0.72 for Paraguay in 2012 (higher of the key challenges facing women in Paraguay to- than the average ratio for LAC of 0.65 in 2011) - indicating day. Besides endowments and economic opportunities, that the gender gap is still in favor of men. Part-time work agency is the third dimension of gender equality accord- force is rapidly increasing in Paraguay, especially for wom- ing to the World Development Report on Gender Equality en: From 24 percent (percentage of total female employ- and Development (2012). Agency can be understood as ment) in 2000 to 31 percent in 2010. The male part-time the process through which women and men use their employment participation only increased to 14 percent in endowments and take advantage of economic opportu- 2010. 58 While part-time regulations greatly enable wom- en to conciliate domestic/care with remunerated work, it 59 Definition 1, SEDLAC: Informal=salaried workers in small firms, also comes at the cost of lower income and the reduction non-professional self-employed and zero-income workers 60 Informality In Latin America And The Caribbean, 2009 Norman V. of probability to being promoted. Total female unem- Loayza, Luis Serven and Naotaka Sugawara ___________________________________________ 61 SEDLAC database 56 WHO 62 Women in the Informal Sector: a Global Picture, the Global Move- 57 Centro Paraguayo de Estudios de Poblaci6n (CEPEP). Encues- ment by Martha Alter Chen. to Nacional de Demografta y Salud Reproductiva 2008 (ENDSR 2008). 63 Agency is defined as an individual's (or group's) ability to make Informe Final effective choices and to transform those choices into desired out- 58 World Bank Indicators comes. in21)bt i aauyad nLC oeo9,tegn nities to achieve desired outcomes. Thus, agency is essen- 9. Paraguay has implemented several measures tial to understanding how gender outcomes emerge and to confront domestic violence. The Ministry of Wom- why they are equal or unequal. Agency, or a lack there- en, through the Service to Women (Servicio de Atenci6n of, can manifest itself for instance in low levels of female a la Mujer - SEDAMUR) provides comprehensive informa- political participation, high prevalence of gender-based tion and advice to women victims of domestic violence; violence, or high rates of teenage pregnancy. the government has amended the legal definitions of domestic violence and human trafficking in order to be 8. Domestic violence continues to be a key problem more inclusive; the first shelter for victims of domestic vi- which Paraguayan women suffer from. Violence against olence has been created (in 2010); four Women Regional women has been recognized by the United Nations as a Centers have been established to provide comprehensive public health problem, a violation of women's rights and a services for victims of gender-based violence around the barrier for economic development. Law No. 1600"Against country (located in Ciudad del Este, Filadelfia, Curuguaty Domestic Violence" (2000) and the Penal Code are the le- and Pedro Juan Caballero); and finally, six specialized po- gal instruments that address this issue. The Penal Code lice stations have been established to receive complaints was reformed in 2007 and now includes psychological vio- about violence against women, children and adolescents, lence beyond other forms of violence. According to PAHO among others. 2012, intimate partner violence against women is wide- spread in the LAC region. According to the Encuesta Nacio- 10. The adolescent fertility rate has decreased over nal de Demografia y Salud Reproductiva (ENDSSR, 2008), 8 time. From 86.1 births per 1,000 women aged 15-19 years percent of women in Paraguay reported physical or sexual old in 2000 to 66.9 in 2012. This rate is quite similar to the violence by their partner within the last 12 months, while average rate in the LAC region (68 births per 1,000 wom- 20.4 percent of women reported that they have experi- en aged 15-19years old) for 2012. However, it is notable enced physical or sexual violence by their partner at some that, while adolescent fertility has decreased over time, point in their lives. The same survey results indicate that the contribution of adolescent fertility to total fertility in- there is a large gap between women who reside in urban creased (10.5 percent in 1987-90 to 12.8 percent 2005-08) areas compared to those who reside in rural areas. Indeed, according to data from ENDSSR 2008. 65 Also, the reduc- four out of every ten women who live in urban areas expe- tion in fertility per specific age group is smallest amongst rienced verbal violence (40.5 percent), compared to 28.7 teenagers if compared to other age groups and smaller percent of women in rural areas. The same is true when if compared to the total fertility rate. ENDSSR 2008 also comparing physical violence; 20.2 percent of urban wom- showed that teenage pregnancy is not evenly distributed en compared to 14.1 percent of rural women. In term of amongstdifferentethnicandsocio-economicgroups,thus sexual violence there is a smaller difference when compar- indicating that the phenomenon is correlated with social ing the areas of residence (5.4 percent of women in urban exclusion and lack of (economic) opportunities. According areas and 4.5 percent of women in rural areas). Another to the survey, the socioeconomic status and the level of interesting finding is related to whether and/or where education of young women are inversely proportional to women look for help after experiencing any type of vio- the probability of experiencing at least one pregnancy: 5 lence: 44.8 percent of the victims turn to family or friends out of 10 women aged 15-19 years old with zero or up to after experiencing a violent episode, but the percentage five completed years of education reported having had a of women who sought institutional help was much lower pregnancy or more (52.2 percent), while among women (12.9 percent64). According to ENDSSR 2008, women in Par- with 12 and more years of completed education, only two aguay cited shame, fear of retaliation, not knowing where out of ten reported at least one pregnancy (21.5 percent). to go, and not believing that anyone would help as the Notably though, the proportion of pregnant women aged main reasons for not seeking help. Furthermore, among 15-19 years old is higher in rural areas than in urban areas. all countries in LAC with comparable data availability, Par- aguay comes third in regards to women's agreement that 11. Women in Paraguay remain under-represented at wife-beating is justified for at least one reason (22.9 per- all levels of government. In 2012, women occupied 17.5 cent, only after Ecuador and Haiti). ____________________________________________ 65 Centro Paraguayo cle Estudios dle Poblaci6n (CEPEP). Encuesta 64 This is the lowest share among LAC countries for which there Nacional de Demograffa y Salud Reproductiva 2008 (ENDSR 2008). are comparable data available. Informe Final. en9hog h evc oWoe Srii eAecd TabLe A4.1: Key gender indicators comparing Paraguay and LAC Paraguay LCN Education Ratio of femaLe to maLe primary enroLLment (percent) 96.12 (2011) 96.86 (2011) Ratio of femoLe to male secondary enroLLment (percent) 105.18 (2011) 107.10 (2011) Ratio of femoLe to male tertiary enroLLment (percent) 130.75 (2011) 126.78 (2011) Persistence to grade 5, femaLe (percent of cohort) 86.17 (2011) 85.8 (2010) Persistence to grade 5,moLe (percent of cohort) 81.61 (2010) 81.4 (2010) Literacy rate, adult femoLe (percent of femaLe ages 15 and aboue 92.93 (2010) 90.93 (2011) Literacy rate, adult male (percent of maLe ages 15 and aboue 94.81 (2010) 92.22 (2011) Literacy rate, youth femaLe (percent of femaLe ages 15-24) 98.73 (2010) 97.33 (2011) Literacy rate, youth maLe ( percent of males ages 15-24) 98.50 (2010) 96.78 (2011) Health Maternal mortaLity ratio (modeLed estimate, per 100,000 Liue births) 99 (2010) 80 (2010) Births attended by slilLed heaLth staff (percent of total) 81.9 (2008) 90.12 (2010) Pregnant women receiuing prenatal care (percent) 96.3 (2008) 96.17 (2009) Contraceptiue preualence (percent of women ages 15-49) 79.4 (2008) .... Economic Opportunities Labor participation rate, femaLe (percent of female popuLation 53.79 (2012) 51.17 (2011) Labor participation rate, maLe (percent of maLe popuLation) 74.69 (2012) 78.65 (2011) Ratio of femaLe to make Labor force participation rate (percent) (national 72.02 (2012) 65.48 (2011) estimate) Ratio of femoLe to maLe youth unemployment rate (percent ages 15-24) 169.90 (2012) 142.06 (2012) (modeLed ILO estimate) Unemployment, female (percent of femaLe Labor force) (nationaL estimate) 6.09 (2012) 8.45 (2011) Unemployment, male (percent of maLe Labor force) (national estimate) 3.90 (2012) 5.53 (2011) Unemployment, youth female (percent of female Labor force ages 15-24) 14.60(2012) 18.19 (2011) (national estimate) Unemployment, youth maLe (percent of maLe Labor force ages 15-24) 9.0 (2012) 12.36 (2011) (notional estimate) Agency AdoLescent fertiLity rate (births per 1,000 women ages 15-19) 66.96 (2012) 68.02 (2012) Proportion of seats held by women in national parliaments (percent) 17.5 (2013) 24.81(2013) Source: World Bank Genderstats percent of total parliamentary seats while the average for representation amongst city councilors reaches 21.9 per- the LAC region for that same year was 24.8 percent. It has cent in 2011. 66 to be noted though that this is a significant increase from the low level (2.5 percent) in 2000. Similarly, although the WBG Portfolio percentage of women mayors has increased from 2.7 per- cent in 1998 to 7.5 percent in 2011, the percentage con- 12. The objective of the portfolio review carried out tinues to be below the average of the LAC region that was in preparation of the CPS was to provide the coun- 10.2 percent in 2011. It is notable though that women's 66 ECLAC GenderObservatory 66ELA ene Osrvtr try team with an assessment of how the WBG is do- overall beneficiaries in a sex-disaggregated way in the ing in terms of gender mainstreaming. Based on this project's annual plans to ensure gender-sensitive imple- assessment, the country team will develop strategies mentation. to strengthen the gender focus into project design, im- plementation, monitoring and evaluation. The Bank ad- 15. The Road Maintenance Project builds on an analy- dresses gender issues in its current portfolio in Paraguay sis of the situation of women in the department regarding through analysis, respective actions and by monitoring different aspects (e.g. unemployment, economic assets, progress in a sex-disaggregated way. Overall, 80 percent types of discrimination, etc.) and their role in farmers'fam- of the lending portfolio is gender-informed6 and 60 per- ilies (e.g. land cultivation). The Road maintenance project cent of the same are gender-informed in all three dimen- includes a pilot for the creation of "Microenterprises for sions. 68 Some concrete examples of how the portfolio is Road Maintenance", where an affirmative action approach addressing gender issues in the different sectors are brief- ensured a 29 percent of staff hired for the pilot were fe- ly described below. male - to ensure women benefit equally from employ- ment opportunities created, at the same time challeng- 13. The Sustainable Agriculture & Rural Develop- ing traditionally gendered segregation within the labor ment Project (PRODERS) builds on a gender analysis market. At the moment, the project implementation unit of the role that women play as agricultural producers in is expanding this pilot-approach to a broader set of the the project context. The project is building capacity of roads under maintenance, creating in total 200 posts and local women and promotes the establishment of wom- working within the Ministry of Public Works and Commu- en's associations, ensuring that women play a role in the nications to scale-up this experience. Finally, a planned day-to-day functioning of their sub-projects through impact evaluation will capture disaggregated data by meaningful representation on the communities commit- gender that provides information on access to services tees. Particularly, the capacity to generate income will be (health, education, water, power, etc.), transportation pat- strengthened among indigenous women by supporting terns, levels of education, and economic activities, among handicraft activities in indigenous communities support- others. Similar projects (particularly an Impact Evaluation ed by the project. The project is monitoring the share of (IE) in 2006 for a similar project in Peru) have shown the beneficiaries by sex - latest available data showed that following gender-related impacts: (i) School attendance 39 percent of members of the associations supported by of girls between 6 and 11 years old increased (by 5 per- the project are women. While the majority of associations cent from 2004 to 2006); (ii) Non-remunerated activities supported by the project are mixed, 49 associations sup- performed by women have been reduced (by 12 percent ported are women-only groups. from 2004 to 2006); (iii) Women living in the areas of in- tervention have reported that thanks to road improve- 14. The Project for the Conservation of Biodiversity ments the time they spend getting food and kerosene and Sustainable Land Management in the Atlantic For- has reduced; (iv) Women also reported an increase in po- est of Eastern Paraguay includes a gender analysis on the litical participation at the local level; and, (v) Reductions role that female small farmers and female headed house- in travel time to school and health centers have been holds play in natural resource management. Furthermore, translated into more free time for women to participate this project builds on PRODERS'strategy to build capacity in economical and associative activities. Furthermore, a of local women, promote the establishment of women's recently completed IE 2014 (for Peru as well) is showing associations, and encourage their participation in project that school attendance for girls between 12 and 18 years decision-making. The project will monitor the number old increased (by 19 percent from 2006) and visits to the of subprojects to be executed by women as well as the health center by women increased (by 57 percent from _______________________________________ 2006). 67 Using the methodology used by PRMGE 68 There is one project in the portfolio that is not gender-in- formed. This translates into 20 percent of projects not being gender informed. At the same time, due to the technical nature of the proj- for Paraguay, has a strong gender focus, not only provid- ect and its components, it seems reasonable that it is not a gender informed project (the Energy Sector strengthening Project). If the project cannot be gender-informed by definition of its technical by dedicated in-depth analysis on women's labor market nature, it should not be flagged as not complying with the gender outcomes and teenage pregnancy in the country. requirements. 159h odMitnnePrjc ulso naay ANNEX 6 Consultations with Stokeholders 1. The WBG in partnership with the GoP organized 4. Donor coordination and harmonization of programs in-country consultations in preparation of the Coun- of cooperation is another major challenge, and there was try Partnership Strategy. Sectorial meetings with the general consensus that the government needs to define following groups were organized: (i) international donor a work plan with the international community to avoid community that included the embassies and diplomatic duplication of projects or overlapping of work in strate- missions, international cooperation organizations and gic sectors (e.g. energy, and water and sanitation). The bilateral and multilateral organizations; (ii) opinion lead- knowledge exchange agenda should also have a high ers; (iii) private sector which included representatives of degree of coordination. A key recommendation is that business, production and financial sector associations; the cooperation activities and operations should support and (iv) civil society that included organizations working long-term programs that transcend presidential terms, on issues of poverty, citizen participation, transparency, such as the research towards the National Education education and anti-corruption. Plan and the National Health Plan, and not focus only on solving short-term problems. Participants in the meeting Consultation with the Donor agreed on the need to further strengthen the role of civil Community society in cooperation programs to ensure project moni- toring and proper accountability. 2. The Consultation with the donor community showed a high level of consensus on development 5. Development partners noted that an important priorities and challenges faced by Paraguay. The rep- change that must be observed and taken into account resentatives of the international community pointed out in their strategies is the increasing urbanization rate that that Paraguay has changed and that the economic growth the country is experiencing and the challenges linked to experienced in the last decade has led to the country's that this change, with focus on infrastructure.. In addition, progress in various sectors. It was stated that this new cooperation should help to strengthen the links between scenario requires a change to the traditional model of the central government and local governments. There bilateral and multilateral cooperation. Representatives of is an opportunity to achieve this goal by promoting di- international organizations agreed that the government's alogue platforms on development issues, involving the demands to their organizations are also currently focused central government and local governments. They also on the transfer of knowledge, and not only on the transfer noted that there are emerging issues that are not being of funds. considered in terms of public policy. For example, the potential of extractive industries and in particular the 3. Despite the positive changes in the macro econo- possibility of finding oil in the Chaco, that could drasti- my and the private sector, the perception from several cally change the country's GDR The country is not ready donors is that the public sector continues to face the to respond to the externalities linked to this potential de- enormous challenge of substantially improving the velopment and it must be supported to develop novel, quality of delivery of public services. In this sense, the innovative initiatives and to generate the necessary struc- effective and efficient execution of cooperation projects tures and instruments to take advantage of this potential is one of the significant shared objectives. The public sec- scenario. tor remains weak, especially in the quality of its human resources and internal management systems, with exces- ConsuLtation with Opinion Leaders sive bureaucracy in the internal processes. Donors agreed that further efforts are needed in order to strengthen the 6. Opinion Leaders emphasized that there are urgent project implementation units. Common areas where two public sector reforms that have to be implemented, such or more agencies could work together were identified, as improving tax collection capacity, improving the qual- such as procurement. ity of public spending, and improving mechanisms for accountability and citizen participation and public trans- dulcto o rjcs roelppn fwrki9tae parency mechanisms. It was recognized that although Consultation with the priuate sector a "wave of public transparency" is being experienced in Paraguay (which leads to insight into the performance of 8. The private sector expressed a consensus that while public expenditure) and that -like never before- country Paraguay has changed, there are still gaps in key sectors data is available to the public, data are neither readily ac- that should be addressed, and in this sense the biggest cessible nor easy to read. Participants were of the opinion problem is still related to infrastructure development. that the WBG could play a role in supporting the devel- The country has geographic advantages which are being opment of friendly platforms to facilitate access to public well used bythe private sector. However, the competitive- information. There was also consensus that the rational- ness of the country should be strengthened to maintain ization of public expenditure should be one of the prior- sustainable performance over the long term. The private ities for the country in the short and medium terms. For sector representatives agreed that the country's main instance, incentive and merits schemes and open com- problem is not funding but management capacity. Focus- petitive processes for selecting public officials should be ing on rules and standards which determine the working created. The WBG could facilitate knowledge exchange environment of the public sector (and which go beyond channels to provide alternatives for this kind of initiative, their legal formulation) was identified as crucial. 7. Opinion Leaders also indicated that they believe that Consultation with Ciil Society tax evasion is very high in Paraguay (approx. 40 percent of potential revenue) and that tax collection agencies 9. Civil Society organizations indicated that there is a should be strengthened through the development and major weakness in terms of instruments and official chan- implementation of an information crosscheck system, for nels to monitor government institutions, and that isolat- example. It was stated that the country must strengthen ed bottom-up control initiatives have been developed its regulatory capacity, especially relevant to the issue of but few coordinated actions exist at the national level. PPPs, vis-n-vis the investment boom that the country is It was stated that the WBG could provide support to the facing. It was also noted that it is very important that the Open Government initiatives, with special focus on Public WBG continues to work to strengthen the infrastructure Private Partnership projects that will require the develop- development in Paraguay, which has been identified as a ment and implementation of stringent control and mon- chronic deficit that must be mitigated. The issues related itoring instruments. Another priority identified was the to housing and sanitation infrastructure were highlighted need to strengthen the civil servant training programs as two of the most important urban challenges taking to enhance the quality of public policies management. into account that Paraguay could have 15 major cities in Lack of coordination between line ministries and agen- the next 10 years. On financing for the private sector, the cies was also highlighted as one of the main challenges. support provided to traditional sectors such as agribusi- A reform in the education sector, with a focus on higher ness was assessed, but it was also recommended to sup- education, was also identified as a priority. Finally, it was port sectors that - while not yet consolidated- have vast recommended to generate opportunities for civil society potential, such as, sewage treatment plants, reforestation organizations to have a more active role in the monitor- ventures, new technologies development to diversify the ing and evaluation of programs financed by the WBG and productive matrix and increase productivity (e.g. irriga- that as part of this process the WBG could also have an tion systems). It was noted that the WBG could play a cru- active role in strengthening these CSO's with knowledge cial role in supporting the Government to enhance public and resources to improve their monitoring and evalua- expenditure implementation and management; and that tion capabilities. could also contribute to the development of tax evasion prevention and anti-corruption programs and initiatives. The WBG is seen as an organization that can share experi- ences from other countries in these areas. inoacutta9aauycol ae1 ao iisi ANNEX 7 Paraguay at a GLance POVERTY and SOCIAL mLwr Emi.'.e- 2012 Deuelopment diamond* Population, mid-year (millions) 6.7 581 2,507 GNI per capita (Atlas method, US$) 3,400 9,070 1,893 Life expectancy GNI (Atlas method, US$ billions) 22.8 5,273 4,745 Auerage annual growth, 2006-12 GNI Gross Population (6) 1.8 1.2 1.5 per primary capita enrollment Labor force (6) 2.3 1.9 1.4 Most recent estimate (Latest year auaiLabLe, 2006-12) Pouerty (6 of population below national poverty line) 32 Access to improved water source Urban population (% of total population) 62 79 39 - Paraguay Life expectancy at birth (years) 72 74 66 - Lower-middle-income group Infant mortaLity (per 2,000 live births) 19 16 46 Child maLnutrition (% of children under5) .. 3 24 Access to an improued water source (% of population) 94 94 88 Literacy (% of population age 15+) 94 91 71 Gross primary enroLLment (% of school-age population) 95 113 106 MaLe 97 115 107 Female 93 111 104 KEY ECONOMIC RATIOS and LONG-TERM TRENDS GDP (US$ billions) 7.2 6.3 26.0 25.5 Economic ratios* Gross capital formation/GDP 18.5 15.1 16.2 15.0 Exports of goods and seruices/GDP 49.8 52.9 48.9 46.6 Trade Gross domestic savings/GDP 28.7 31.6 16.5 14.7 Gross national souings/GDP .. 24.2 14.8 12.4 Domestic Capital Current account boLance/GDP .. 10.0 1.2 0.3 savings formation Interest payments/GDP 3.5 1.7 0.6 0.7 Total debt/GDP 23.6 48.1 22.8 24.8 Total debt service/exports .. 9.8 3.4 6.3 Indebtedness Present vaLue of debt/GDP .. .. .. 21.3 - Paraguay - Lower-middle-income group Present value ofldebt/exports .. .. .. 42.6 (average annual growth) GDP 1.7 4.1 4.3 -1.2 6.5 GDP per capita -0.6 2.2 2.5 -2.9 4.7 Exports of goods and services 0.1 5.0 2.8 -7.0 11.2 Note:This table was produced from the Development Economics LDB database. *The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. 9 STRUCTURE of the ECONOMY (6 of GDP) Growth of capital GDP (%) Agriculture 15.8 14.9 21.4 17.4 30 Industry 37.6 40.5 27.5 28.1 20 Manufacturing 14.9 13.5 11.7 11.6 10 0 Seruices 46.6 44.6 51.0 54.5 -10 Household inaL consumption expenditure 63.3 59.3 73.3 73.0 -20 07 08 09 10 11 12 GeneraL gou't inal consumption expenditure 8.0 9.1 10.3 12.2 - GCF -- GDP Imports of goods and seruices 39.7 36.4 48.6 46.9 (average annual growth) AgricuLture 2.9 4.3 3.7 -20.1 Growth of exports and imports (%) Industry 1.6 2.5 3.0 4.7 30 Manufacturing 0.3 1.7 -1.6 4.6 20 10 Seruices 1.1 5.1 5.8 6.1 0 Household final consumption expenditure 0.7 5.1 8.6 1.0 -10 -20 GeneraL gou't inaL consumption expenditure -0.5 7.4 5.3 21.0 07 08 09 10 11 12 Gross capitaL formation -1.2 4.5 10.8 -7.5 - Exports -*- Imports Imports of goods and seruices -3.1 7.2 10.4 -3.5 PRICES and GOVERNMENT FINANCE Domestic prices (% change) InRation (%) Consumer prices 15.2 10.5 8.3 3.7 12 10 ImpLicit GDP defRator 14.1 14.9 9.8 4.6 8 6 Gouernment fnance 4 (6 of GDP, includes current grants) 2 0 Current revenue 12.0 14.0 16.8 17.9 07 08 09 10 11 12 Current budget baLance 1.9 0.9 4.0 2.5 - GDP deflator -*- CPI OueraLL surplus/deicit -0.3 -2.6 0.7 -1.7 (US$ millions) TotaL exports (fob) 657 2,331 7,775 7,284 Export and import LeueLs (US$miL) Soy products 137 341 2,294 1,582 15000 Cotton .. 1,378 2,267 2,232 10000 Manufactures 226 439 2,326 2,505 5000 TotaL imports (cif) 1,237 1,510 11,549 10,756 0d di d dii Food 170 188 806 813 06 07 08 09 10 11 12 FueL and energy 145 239 1,507 1,694 - Exports - Imports Capital goods 404 425 4,413 3,682 Export price index (2000=100) .. .. .. Import price index (2000=100) .. .. .. Terms of trade (2000=100) .. .. .. BALANCE of PAYMENTS F (US$ millions) Exports of goods and seruices 3,432 13,386 12,681 Current account balance to GDP (% Imports of goods and seruices 2,330 12,640 11,985 8 6 Resource baLance 1,102 747 697 4 Net income .. -598 -1,171 -1,401 2 H 0 Net current transfers .. 126 740 773 -2 Current account baLance .. 630 315 69 -4 Financing items (net) .. -714 469 -93 06 07 08 09 10 11 12 Changes in net reserues .. 84 -784 25 Memo: Reserues including goLd (US$ millions) 573 641 4,983 4,995 Conuersion rate (DEC, local/US$) 1,500.3 5,716.3 4,183.1 4,407.8 EXTERNAL DEBT and RESOURCE FLOWS 1992 (US$ millions) Composition of 2012 debt Total debt outstanding and disbursed 1,688 3,041 5,918 6,331 (US$miL) IBRD 213 216 245 331 331 11146 IDA 39 25 12 11 1517 Total debt seruice 633 343 459 796 1255 IBRD 62 26 41 34 IDA 1 2 2 1 Composition of net resource Rows 2617 454 Official. grants 45 19 82 69 Official creditors -89 -15 -47 26 A - IBRD E- Bilateral B - IDA F - Private Priuatecreditors -168 105 260 466 C-IMF G - Short-term Foreign direct inuestment (net inflows) 118 10 134 363 D- Other multilateral Portfolio equity (net inflows) 0 0 0 0 WorLd Bank program Commitments 52 9 100 100 Disbursements 10 14 23 117 Principal repayments 43 17 37 30 Net Rows -33 -3 -14 86 Interest payments 21 11 5 5 Net transfers -54 -14 -19 81 Note: This table was produced from the Development Economics LDB database. ANNEX 8 Operations PortfoLio: IBRD Loans, pipeLine and non-Lending operations CLosed Projects IBRD/IDA* Total Disbursed (Actiue) 64.47 of which has been repaid 3.31 Total Disbursed (CLosed) 331.97 of which has been repaid 324.88 Total Disbursed (Actiue + Closed) 396.44 of which has been repaid 328.18 TotaL Undisbursed (Actiue) 211.03 Total Undisbursed (CLosed) 0.00 Total Undisbursed (Actiue + CLosed) 211.03 Projects and grants Name Amount Project Number Isrmn (in US$ mittion) tp GPSA Paraguay: Social Accountability on Condi- 2015 0.6 P150876 IPF tional Cash Transfer Programs - grant PY DPL-DDO 2015 100 P151007 DPL PY Rural Connectiuity 2015 100 P147278 IPF IPF: Investment Project Financing DPL: Development Policy Lending AAA Project Name PoLieProject Number Strengthening Tax Admin e SOE Corp. Gou. 2015 TA P148234 PY Pension Work 2015 TA TEMPCODE PA PY FPD Programmatic Approach 2016 PA P147386 PY PPP 2016 PA TEMPCODE AgricuLture Rislh Management 2016 PA P145224 PY Extractiues 2015 PA TEMPCODE PY EDUCATION 2015 TA TEMPCODE PY Equity and Pouerty/Gender Support 2015 PA TEMPCODE PY SOCIAL PROTECTION TA 2015 TA TEMPCODE PY New - Financial sector stability worh 2016 TA TEMPCODE TA:Technical Assistance PA: Programmatic Approach mOI 喝H 喝H 蒙；:1。1 1」／「／「／- 1-；… 11。／り’・》」 中 ANNEX9 Trust funds C3 cs c 0 U) CD u) cn 0 U) -i cn -i cn -i U) -i V) CL cý a_ 0ý o- 0ý CL 0ý o- cr c- E t 0 F-- 0 F-- 0 F-- 0 F- 0 In cL z -J z -J z -J z -J z E 0 0 0 0 c, o LU U 0 6 0 cs -i vi 0 w o- C3 C3 c 2 uj z U) cs < u) u 0 m c 0 c C3 c 0 C3 dE E < en Ln N u u In LL. < u) cr LU (D 0q Lq Ln w E w C3 C3 c c C5 M C3 c 0 u UJ _0 - - (n o - E -.g c, 'n Li- u) "C3 < 2 WM 2 # jýg a_ = 0 0 ,5 0 C3 C3 c cs c, u u < E C3D m U) m =D C3 "Cý M C.O c _o 2 2 2 0. C3 c c c 2 c = 0 =c> U m= Uo z' 00 00 Li- Li- Li- Li- L.L ANNEX 10 Suruey on WeLL-being uia Instant and Frequent Tracking (SWIFT) Paraguay Water V Sanitation SWIFT Frequent Tracking) to fill the data gaps in the monitoring Survey Experience of national statistics and projects by calculating poverty rates and income levels in a more simply, cheaply, and 1. The WBG's twin goals-eliminating extreme pov- quickly manner. SWIFT achieves this bycombining the lat- erty and boosting shared prosperity-have intensified est in Information and Communication Technology (ICT) interest in measuring the level and evolution of pover- with the latest statistical methodology. ty rates and income levels in populations targeted by projects and programs. Operations that cover the poor- Conceptual Framework er segments of the population are a necessary, though not sufficient, prerequisite for faster progress towards 5. SWIFT uses a projection method to estimate pover- the elimination of extreme poverty and the sustained in- ty and distributional statistics. It does not collect direct crease in the average level of welfare of the bottom 40% income or consumption data; instead, it collects poverty of a country's population. correlates, such as household size, ownership of assets or employment conditions, and then converts them to 2. Thus, there is a need for quick, practical, low cost, poverty statistics using statistical models. Collection and reliable tools for estimating poverty rates and income of poverty correlates is much easier and can be accom- levels among WBG project beneficiaries. Traditionally, of- plished much more quickly than collection of income or ficial poverty rates have been measured at the national consumption data. Second, SWIFT uses Computer-Assist- level, or in some cases -for urban and rural areas of de- ed Personal Interview (CAPI) software to create a ques- veloping countries- via nationally representative surveys tionnaire and allow full accessibility from tablets and/or that collect information on household and individual so- smart phones. cioeconomic characteristics and detailed information on income and/or consumption expenditures for a sample 6. Interviewers ask questions regarding poverty cor- of households. The sheer size of the questionnaire and relates using the tablets or smart phones and the data are volume of information required for reliable measurement uploaded via the Internet to a data cloud whenever inter- of household welfare (i.e. income or consumption) makes viewers reach any location where Internet connections these types of surveys impractical and prohibitively costly are available. Data analysts then download the data and for measurement at project level, convert them into poverty and distributional statistics. 3. In addition, a large obstacle in monitoring these goals SWIFT for Paraguay Water e is that household expenditure and income data are not Sanitation Mo mernication Project frequently collected. According to World Development In- dicators (as of May 2013), some 40 percent of developing 7. As part of the preparation of the Paraguay CPS, the countries had zero or only one poverty estimate between Bank team worked to monitor the contribution of four 2001 and 2010. And the situation is even worse when it major projects in the country on reduction of extreme comes to the monitoring of investment projects and lend- poverty and boosting shared prosperity. As part of this ing programs. Since the impact of many investment proj- process, the team has decided to use SWIFT to monitor a ects and lending programs is geographically limited, pov- water and sanitation program's poverty impact as well as erty estimates at the national level, or even for urban and immediate sector-specific outcomes (e.g. increase in ac- rural areas, are not directly useful for monitoring project cess to clean water). impacts on extreme poverty and shared prosperity. 8. In the context of Paraguay project monitoring, the 4. To address this problem the WBG Poverty Global SWIFT survey will produce a poverty rate and a mean in- Practice (GPVDR) developed the a new welfare moni- come of the bottom 40 percent in the beginning of the toring tool, SWIFT (Survey on Well-being via Instant and CPS process in areas where the water and sanitation proj- 3.I ddto, ageosacei mntrigtes9ol ect has been implemented. These numbers will become a benchmark. The same survey will be carried out during the preparation of the CPS progress report to see evolu- tion in these key indicators. 9. A surveying company was selected to carry out the field work. Before the beginning of the fieldwork, a train- ing session was carries out, in a four-day event, for the ten enumerators and two supervisors. Representatives from the government's health agency (SENASA) also at- tended the first day. Enumerators and supervisors gained a strong understanding of the questionnaire content as well as CAPI, tablet, and 3G technology. In addition, they provided valuable local contextual knowledge to improve the content of the questionnaire where appropriate. The surveying company then proceeded to the field to con- duct approximately 800 interviews in rural communities in western and eastern Paraguay, both indigenous and non-indigenous. 10. A major obstacle encountered during the survey fieldwork was heavy rain and resulting poor road condi- tions that prevented the team to access to some of the selected communities. However, enumerators ultimately reached all but three communities, which will be visited at the end of June. Another obstacle was the lack of con- nectivity for tablets. Often tablets lacked 3G, Wi-Fi, and GPS capacities in the rural communities, particularly the indigenous areas. This meant the upload of completed surveys was not literally real-time, nor were the revisions from the supervisors. Nonetheless, resulting survey data has thus far been high quality. SWIFT Model for other projects in the Bank's portfolio in Paraguay 11. SWIFT model will be used also to monitor other proj- ect's poverty impact as well as immediate sector-specific outcomes, when required. While the team will use the Na- tional Household data for the Energy Sector Strengthen- ing project because it has a nation-wide impact; the team will use other project-linked surveys for the Roads Main- tenance Project and the Sustainable Agriculture and Rural Development Project (PRODERS). ANNEX 11 Map re ja i1 R AZIL AWGE NTINA_ PA RAG UAY u au sem up   WORLD BANK GROUP World Bank Paraguay Espafha 2028 C/ Brasilia Urano Building - 5th Floor Asunci6n Ph:+ 595 21 218 1000 Fax:+ 595 21 218 1229 www.bancomundial.org.py