The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) Appraisal Environmental and Social Review Summary Appraisal Stage (ESRS Appraisal Stage) Public Disclosure Date Prepared/Updated: 12/11/2019 | Report No: ESRSA00385 Dec 12, 2019 Page 1 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) BASIC INFORMATION A. Basic Project Data Country Region Project ID Parent Project ID (if any) Mexico LATIN AMERICA AND P169959 CARIBBEAN Project Name Modernization of Public Financial Management Systems in Mexico Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date Governance Investment Project 12/10/2019 2/6/2020 Financing Borrower(s) Implementing Agency(ies) United Mexican States Ministry of Finance and Public Credit (SHCP) Proposed Development Objective(s) Public Disclosure To improve the coverage and timeliness of public financial information and its use by the Federal Public Administration. Financing (in USD Million) Amount Total Project Cost 110.00 B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No C. Summary Description of Proposed Project [including overview of Country, Sectoral & Institutional Contexts and Relationship to CPF] The Project comprises four key areas of intervention or components: (1) strengthening core public financial management functions and systems, i.e. budgeting, accounting, treasury, public investment and public debt management; (2) supporting resource management functions and systems in federal government agencies including payroll, procurement, and asset management; (3) enhancing the use and transparency of public financial management information, contributing to evidence-based decision-making; and (4) strengthening institutional capacity to support the reform process, including ICT platforms, the technological architecture underlying the public financial management information systems, and change management activities. Dec 12, 2019 Page 2 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) D. Environmental and Social Overview D.1. Project location(s) and salient characteristics relevant to the ES assessment [geographic, environmental, social] The Project will be implemented at the federal level by the Secretariat of Finance and Public Credit (SHCP for the Spanish acronym) and with participation of line secretariats of the Federal Government. The Project will finance the deployment of consulting and advisory services, capacity building activities, as well as investment in hardware and software. No civil works will be financed. ESS1, ESS2, ESS3 and ESS10 are relevant. No negative environmental or social impacts on the population are expected given the nature of the Project. D. 2. Borrower’s Institutional Capacity The Project Administration Unit (PAU), which will hold administrative, fiduciary, and monitoring responsibilities, will be located in the Undersecretary of Expenditures of the SHCP. While the Undersecretariat has experience in working with the World Bank on four Reimbursable Advisory Services (RAS) and a Technical Assistance Loan (TAL) on Results- Based Management and Budgeting in the past, it has no present experience in implementing World Bank lending operations. The World Bank will provide support to the PAU to comply with the applicable commitments to implement relevant parts of the World Bank Environmental and Social Framework (ESF). II. SUMMARY OF ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS A. Environmental and Social Risk Classification (ESRC) Low Environmental Risk Rating Low Public Disclosure The environmental risk of the Project is Low. The Project will finance consulting and advisory services, and capacity building to support the modernization of standards and practices for greater control, management and accountability along the budget cycle and help improve and consolidate Mexico’s technological platform for public financial management. Investment in hardware and software programming are expected and related e-waste and energy efficiency aspects will be considered in the Operational Manual (OM). Strengthening fiscal transparency and citizen participation could also help create opportunities for civil society, institutions and networks that are pushing the agenda of good governance linked to environmental management in public investments. Social Risk Rating Low The social risk of the Project is Low. The Project will finance consulting and advisory services, and capacity building to support the modernization of standards and practices for greater control, management and accountability along the budget cycle and help improve and consolidate Mexico’s technological platform for public financial management in order to improve the Public Financial Management system. No activity will finance or lead to physical displacement, construction works, negative impacts on social inclusion, or negative impacts on vulnerable populations. The strengthening of fiscal transparency and citizen participation initiatives considered under Component 3 are expected to support financial intelligence and innovation, the strengthening of accountability mechanisms within public finance, and the strengthening of fiscal transparency tools and structures. B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered B.1. General Assessment ESS1 Assessment and Management of Environmental and Social Risks and Impacts Dec 12, 2019 Page 3 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) Overview of the relevance of the Standard for the Project: The Environment and Social (E&S) screening did not identify potential E&S risks and/or impacts of concern. The E&S screening was based on relevant information collected on (i) Mexico’s E&S risk management capacity and approach, including discussions with the PAU, (ii) the scope of activities described in the Project Appraisal Document (PAD), and (iii) the experience of SHCP in implementing World Bank projects. The Project includes technical activities to improve the Public Financial Management system, thus strengthening public accountability and transparency. SHCP will incorporate E&S risk management processes and procedures consistent with ESS1, ESS2 and ESS3 in the OM that will be finalized by Negotiations. The OM will provide specific provisions to ensure that consulting firms hired apply labor management principles consistent with the requirements of ESS2. The OM will also provide guidance on labor requirements to be incorporated in terms of reference, contracts, and reporting mechanisms to ensure that the activities and outputs are in line with the national laws and regulations and ESS2 for labor management. Regarding ESS3, the OM will include relevant national regulations and institutional practices for e-waste management and potential actions needed to secure full compliance with the national regulations and ESS3. An E-Waste Management Plan will be developed prior to preparation of the first electronic equipment acquisition process as an annex to the OM, disclosed as a stand-alone document at the SHCP website and the World Bank external website and implemented throughout the Project period. ESS10 Stakeholder Engagement and Information Disclosure Public Disclosure The Project has two types of stakeholders: i) the internal administrative departments within the SHCP, other centralized secretaries and decentralized public institutions; and ii) representatives of civil society at large, civil society organizations, and academia, involved and interested in monitoring public spending. Taken the Project has Low Environmental and Social Risk and no other directly Project-affected parties than few individuals and consultancy firms that will be contracted to deliver on it, the main stakeholder engagement activities, i.e. continuous engagement and adequate communication with the interested parties throughout Project implementation, have been included in the ESCP instead of preparing a stand-alone Stakeholder Engagement Plan (SEP). Starting at year one, the SHCP will disclose information on Project actions and progress to stakeholders within SHCP and establish a mechanism to ensure effective communication with them. Workshops and dissemination material will be developed to inform on the Project results. Project activities on fiscal transparency are planned for the third year of implementation and will engage relevant civil society stakeholders, including NGOs, think thanks, and opinion makers. SHCP has a Grievance Redress Mechanism (GRM) and transparency channels that will be used throughout Project implementation to address any complaints related to the Project. The GRM will be described in the OM and the SHCP website. B.2. Specific Risks and Impacts A brief description of the potential environmental and social risks and impacts relevant to the Project. ESS2 Labor and Working Conditions Activities under the Project are not expected to have any negative impacts related to labor and working conditions. The applicable national legal framework is aligned with the principles of ESS2. The Project will be implemented Dec 12, 2019 Page 4 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) primarily by government staff from the SHCP. In line with ESS2, where government civil servants are working in connection with the Project, whether full or part-time, they will remain subject to the terms and conditions of their existing public sector employment agreement or arrangement, unless there is an effective legal transfer of their employment or engagement to the Project, in which case, ESS2 will apply to such government civil servants. Provisions of paragraphs 17 to 20 (Protecting the Work Force) and paragraphs 24 to 30 (Occupational Health and Safety) apply to the Project; these provisions are adequately covered by Mexican Law. However, the Project will finance consultancy firms that will be requested to provide documented evidence that their working conditions are in line with ESS2. This requirement will be reflected in the OM, bidding documents, and the actual contracts between the SHCP and its providers. SHCP provides guidance through Labor Management Procedures (LMP) to guide subcontracted firms in related requirements. SHCP has prepared a satisfactory draft LMP for the Project prior to Appraisal, and the draft will be finalized prior to Negotiations. The LMP will form a part of the Project’s OM. Implementation and potential improvements, in case necessary, will be made throughout Project implementation. ESS2 provisions will be included in bidding documents and contracts throughout Project implementation. Moreover, SHCP will establish, maintain, and operate a Grievance Redress Mechanism (GRM) for its employees. Consultancy firms will be requested to provide documented evidence of the existence and effective implementation of a GRM for their workers before starting the contracted service. ESS3 Resource Efficiency and Pollution Prevention and Management ESS3 is relevant. The OM will include relevant national regulations and institutional practices for e-waste Public Disclosure management and potential actions needed to secure full compliance with the national regulations and ESS3. An E- Waste Management Plan will be developed prior to preparation of the first electronic equipment acquisition process and will be then implemented throughout Project implementation. Furthermore, resource efficiency and pollution prevention and management requirements are included in the OM to secure procurement of energy efficient IT equipment. ESS4 Community Health and Safety ESS4 is not relevant. The Project will neither finance nor support any civil works activities. No rehabilitation or construction of new infrastructure or other actions having an impact on the physical environment will be financed through the Project, which is not expected to generate any negative impact on community health and safety. ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement ESS5 is not relevant. The Project will not finance physical infrastructure and is not expected to cause physical displacement to formal or informal occupants. No involuntary land taking will be financed. Hence, the Project is not expected to generate any negative impact covered under ESS5. ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources ESS6 is not relevant. The Project will neither finance nor support any civil work activities or policies affecting biodiversity or management of living natural resources. Dec 12, 2019 Page 5 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities ESS7 is not relevant. The Project will focus on consulting and advisory services, capacity building, training activities and technological platform improvement. Despite being implemented at the national level, it is not expected that any of the activities will have a direct impact on Indigenous Peoples as defined by ESS7. ESS8 Cultural Heritage ESS8 is not relevant. The Project will finance technical activities aimed at improving Mexico’s public financial management system; it is not expected to directly or indirectly affect tangible or intangible cultural heritage. ESS9 Financial Intermediaries ESS9 is not relevant. The Project will not channel funds to a Financial Intermediary with the objective of sub-lending. C. Legal Operational Policies that Apply OP 7.50 Projects on International Waterways No OP 7.60 Projects in Disputed Areas No Public Disclosure III. BORROWER’S ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) DELIVERABLES against MEASURES AND ACTIONs IDENTIFIED TIMELINE ESS 1 Assessment and Management of Environmental and Social Risks and Impacts MANAGEMENT TOOLS AND INSTRUMENTS The E&S risk management processes and procedures to be followed during Project implementation 12/2019 will be included in the Project’s Operational Manual (OM), consistent with relevant requirements of ESS1, ESS2 and ESS3, and in a manner acceptable to the World Bank. ORGANIZATIONAL STRUCTURE SCHP will establish and maintain a PAU with qualified staff and resources to support management of 05/2020 E&S risks of the Project. ESS 10 Stakeholder Engagement and Information Disclosure SHCP has a GRM and transparency channels that will be used throughout Project implementation to address any complaints related to the Project. The GRM will be described in the OM and the SHCP 05/2020 website. Dec 12, 2019 Page 6 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) Disclose information on Project actions and progress to interested parties within SHCP and establish a 05/2020 mechanism to ensure effective communication with them. Project activities on improving fiscal transparency will engage relevant civil society stakeholders, 06/2023 including NGOs, think thanks, and opinion makers starting in year 3. Workshops and dissemination material will be developed to inform interested parties on the Project 06/2024 results. ESS 2 Labor and Working Conditions Finalize, adopt, and thereafter implement and revise, if needed, the Labor Management Procedures that SHCP has drafted in a manner acceptable to the World Bank. The LMP will be annexed to the OM 12/2019 and require that consultancy firms comply with ESS2. Establish, maintain, and operate a GRM for Project workers, or require the operation of a GRM (in the 05/2020 case of consultancy firms), as applicable, and as further described in the LMP. PAU/SHCP will ensure that bidding documents and Project-financed contracts with consultancy firms 05/2020 include a clause to ensure that working conditions are in line with the ESS2 requirements. ESS 3 Resource Efficiency and Pollution Prevention and Management Public Disclosure The OM will present the relevant national regulations and institutional practices for e-waste management and define potential actions needed to secure full compliance with the national 12/2019 regulations and ESS3. Resource efficiency and pollution prevention and management requirements will be included in the 12/2019 OM to secure procurement of energy efficient IT equipment. Develop and implement an E-Waste Management Plan (Plan) and incorporate relevant provisions of it in procurement processes. The Plan will be annexed to the OM and disclosed as a stand-alone 03/2021 document at the SHCP website and the WB external website. ESS 4 Community Health and Safety ESS 5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement ESS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources ESS 7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities ESS 8 Cultural Heritage ESS 9 Financial Intermediaries Dec 12, 2019 Page 7 of 8 The World Bank Modernization of Public Financial Management Systems in Mexico (P169959) B.3. Reliance on Borrower’s policy, legal and institutional framework, relevant to the Project risks and impacts Is this project being prepared for use of Borrower Framework? No Areas where “Use of Borrower Framework” is being considered: None IV. CONTACT POINTS World Bank Contact: Henry Forero Ramirez Title: Senior Public Sector Specialist Telephone No: 5782+8215 / Email: hforero@worldbank.org Contact: Alberto Leyton Title: Lead Public Sector Specialist Telephone No: 473-9396 Email: aleyton@worldbank.org Borrower/Client/Recipient Borrower: United Mexican States Public Disclosure Implementing Agency(ies) Implementing Agency: Ministry of Finance and Public Credit (SHCP) V. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects VI. APPROVAL Task Team Leader(s): Henry Forero Ramirez, Alberto Leyton Practice Manager (ENR/Social) Valerie Hickey Cleared on 11-Dec-2019 at 21:15:30 EST Dec 12, 2019 Page 8 of 8