Document of The World Bank FOR OFFICIAL USE ONLY Report No. 48372-BO INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION INTERIM STRATEGY NOTE FOR THE PLURINATIONAL STATE OF BOLIVIA FOR THE PERIOD FY2010-FY2011 April 9, 2009 Bolivia, Ecuador, Peru, and Venezuela Country Management Unit Latin America and the Caribbean Region The International Finance Corporation Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official Duties. Its contents may not otherwise be disclosed without World Bank authorization. The last Interim Strategy Note for Bolivia was discussed by the Board of Executive Directors on October 24, 2006 (Report No. 36095-BO) CURRENCY EQUIVALENTS (as of April 1, 2009) US$1 = 7.07 Bolivianos PLURINATIONAL STATE OF BOLIVIA - FISCAL YEAR January 1 ­ December 31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities FPS National Productive and Social Investment Fund (Fondo Nacional de APL Adaptable Program Loan Inversión Productiva y Social) ATPDEA Andean Trade Promotion and Drug FSAP Financial Sector Assessment Program Eradication Act FY World Bank Fiscal Year ASDI Swedish Agency for International Development GoB Government of Bolivia BCB Bolivia Central Bank GAC Government & Anticorruption BDP Productive Development Bank GAIN Global Alliance for Improved (Banco de Desarrollo Productivo) Nutrition CA Corporate Advice GDP Gross Domestic Product CAE Country Assistance Evaluation GEF Global Environmental Facility Grant CAF Andean Development Corporation GNI Gross National Income CAS Country Assistance Strategy GNP Gross National Product CCT Conditional Cash Transfers GPOBA Global Partnership on Output Based Aid CDD Community Driven Development project GRUS Bolivian Partner Group (Grupo de Socios de Bolivia) CEM Country Economic Memorandum IBRD International Bank for Reconstruction CFAA Country Financial Accountability and Development Assessment IDA International Development Association CIDA Canadian International Development Agency IADB Inter-American Development Bank CY Calendar Year ICT Information and Communication Technologies DfID United Kingdom Department for International Development IFC International Finance Corporation ELB Enhancing Local Benefits INE National Statistics Institute ESW Economic and Sector Work IMF International Monetary Fund EU European Union ISN Interim Strategy Note FDI Foreign Direct Investment LAC Latin American and the Caribbean Region LPG Liquefied Petroleum Gas MDGs Millennium Development Goals PPF Project Preparation Facility MDRI Multilateral Debt Relief Initiative SDR Special Drawing Rights MFIs Microfinance Institutions SEK Swedish Krona MIGA Multilateral Investment Guarantee SMEs Small and Medium Entreprises Agency TA Technical Assistance MSME Micro, Small and Medium Entreprises UDAPE Unit of Economic and Social Policy M&E Monitoring & Evaluation Analysis NDP National Development Plan UN United Nations NLTA Non Lending Technical Assistance UNDP United Nations Development Program NPL Non Performing Loans US United States OECD-DAC Organization for Economic Co- USAID United States Agency for International operation and Development ­ Development Development Assistance Committee WBG World Bank Group PEFA Public Expenditure and Financial Accountability WBI World Bank Institute PFM Public Financial Management WSP Water and Sanitation Regional Program PNRR National Plan of Reconstruction and Rehabilitation YPFB Oil State Company (Yacimientos Petrolíferos Fiscales Bolivianos) PPCR Pilot Program for Climate Resilience World Bank IFC Vice President: Pamela Cox Vice President: Jyrki I. Koskelo Director: Carlos Felipe Jaramillo Regional Director: Atul Mehta Co-Task Managers: Oscar Avalle and Country Managers: Enrique Cañas Maria D. Arribas Baños Co-Task Managers: Eduardo Wallentin and Felix Knidlberger FOR OFFICIAL USE ONLY BOLIVIA INTERIM STRATEGY NOTE: FY2010-2011 Table of Contents EXECUTIVE SUMMARY .......................................................................................................... i I. INTRODUCTION.................................................................................................................... 1 II. COUNTRY CONTEXT.......................................................................................................... 2 III. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS.......................................... 2 A. Political Developments ....................................................................................................... 2 B. Poverty, Inequality, and the Millennium Development Goals (MDGs) ............................. 4 C. The Economic Context and the Impact of the Global Financial Crisis............................... 6 C.1 Recent economic developments..................................................................................... 6 C.2 The international crisis and Bolivian economic outlook .............................................. 7 IV. THE GOVERNMENT'S DEVELOPMENT PLAN........................................................... 11 V. PROGRESS IMPLEMENTING THE WORLD BANK GROUP'S STRATEGY .............. 13 A. IDA Program..................................................................................................................... 13 B. IFC Program...................................................................................................................... 15 C. Multilateral Investment Guarantee Agency (MIGA) Program ......................................... 16 VI. DONOR ASSISTANCE AND COORDINATION............................................................. 16 VII. LESSONS LEARNED....................................................................................................... 18 VIII. PROPOSED WORLD BANK GROUP PROGRAM....................................................... 19 A. Indicative IDA Envelope and IBRD Involvement............................................................ 19 B. Strategic Priorities............................................................................................................. 19 C. IDA Program..................................................................................................................... 27 D. IFC Activities.................................................................................................................... 29 IX. RESULTS FRAMEWORK................................................................................................. 31 X. RISKS AND RISK MITIGATION....................................................................................... 31 XI. CONSULTATIONS ............................................................................................................ 34 Tables Table 1. MDGs's Progress and Projections to 2015.................................................................... 6 Table 2. Key Economic Indicators, 2007-2011 ........................................................................... 9 Table 3. Relevance of Ongoing Portfolio to the new ISN Pillars.............................................. 27 Table 4. Tentative IDA Lending and Analytical Program......................................................... 28 Boxes Box 1. Communications Strategy Outcomes............................................................................. 15 Box 2. Public Financial Management Status............................................................................. 26 Annexes Annex 1. Progress Implementing the Bank's Strategy FY2007-2009....................................... 35 Annex 2. FY2007-2009 ISN Progress to Date........................................................................... 43 Annex 3. World Bank Group Active Portfolio in Bolivia ......................................................... 45 Annex 4. Donor Assistance in Bolivia....................................................................................... 48 Annex 5. Results Monitoring Framework ................................................................................. 49 Annex 6. ISN Consultations ...................................................................................................... 54 Annex A 1. Bolivia at a glance.................................................................................................. 55 Annex B 1. Key Economic & Program Indicators - Change from Last CAS ........................... 58 Annex B 2. Selected Indicators of Bank Portfolio Performance and Management................... 59 Annex B 3. IBRD/IDA Program Summary and IFC and MIGA Program Summary ............... 60 Annex B 4. Summary of Nonlending Services.......................................................................... 62 Annex B 5. Poverty and Social Development Indicators .......................................................... 63 Annex B 6. Key Economic Indicators ....................................................................................... 64 Annex B 7. Key Exposure Indicators ........................................................................................ 66 Annex B 8. Operations Portfolio (IBRD/IDA and Grants), and Statement of IFC's Held and Disbursed Portfolio.................................................................................................................... 67 Map of Bolivia (IBRD No. 33374) PLURINATIONALSTATE OF BOLIVIA ADDENDUM TO THE PROPOSED INTERIM STRATEGYNOTE The purpose of this note is to update the Executive Directors on the economicdevelopments that have taken place in Bolivia since the Regional Operations Committee review of the Interim Strategy Note (ISN) on March 26, 2009. It also includes a col-rection to the table for Annex 4 Donor Assistance in Bolivia. The 2008 estimates have been revised and are presented in bold in the attached table. Revised estimates of GDP growth show that the economy grew at 6.2 percent, slightly above the previous estimate of 6.1 percent, driven by higher investment than originally estimated (17.2 percent compared to 16.3 percent). In addition, the fiscal balance was revised downward from an estimated surplus of 5.5 percent of GDP to 3.2 percent, explained by higher public investment and lower revenues due to the decline in oil prices. Uncertainty about the macroeconomic outlook has increased and the downside risk scenario is becoming the most likely scenariofor 2009 (seeupdated Table 2 below). The deterioration of the external environment,which is shifting the large current account surpluses of recent years into a deficit, and the slowdown in domestic demand due to delays in planned public investment, especially in the oil sector, indicate that the economy is likely to grow at rates closer to the low case scenariopresented in the ISN document. The weaker growth in 2009 is also associated with lower inflation levels driven by a deceleration of aggregate demand and a decline in food inflation. In line with the expected reversal in the current account of the balance of payments- explained by the fall in commodity prices-the trade balance surplus declined during the first quarter of 2009 from the US$555 million reached in the same period in 2008 to US$127 million. While the estimates show a sharper decline in GDP growth in 2009, similar to the original low case scenario estimates, a faster recovery is expected for the remainder years of the ISN. Small surpluses in the current account of the balance of payments are to be expected under the assumption that oil prices continue to recover. The average oil price assumption for 2009 of US$50-55 per barrel still appears to be reasonable, considering the recent recovery of the international oil prices. If this trend continues in the second half of the year and strongersigns of gradual recovery in the world economy continue, the Bolivian economy could return to a higher growth path for the 2010-2012 period. Since the distributionof the ISN report, the IMF announced a regular Staff visit to Bolivia in mid-June 2009. Updated Table 2. Key EconomicIndicators, 2007-2012 1 1 / 1 ISN Basecase ISN Low case UpdateMost Likely case 2W7 2008* 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 1 I I::: I!! 1 (Annualgrow Growth Rate of GDP 4.6 3.1 3.5 3.7 3.7 Inflation(e.0.p.) 7.0 5.2 5.2 5.2 Devaluation Rate(e.0.p.) 0.5 8.5 5.7 5.6 (Perceittage of I Investment 16.1 17.2 17.6 17.3 17.3 17.4 Public 9.4 10.2 10.9 10.1 10.1 10.1 Private 6.7 7.0 6.7 7.2 7.2 7.3 Overallfiscal balance 1.7 3.2 -3.7 -1.8 -1.0 -0.6 Primary fiscal balance 4.2 4.1 -2.0 -0.3 0.5 0.9 Currentaccount 12.1 12.2 -1.9 0.5 1.3 1.5 Good exports 34.0 36.8 21.9 23.3 23.9 24.2 Good imports 26.3 28.2 26.7 25.1 24.9 24.7 Foreigndirectinvestment 1.5 1.5 0.3 0.4 0.8 1.0 (US$billior Net international reserves 1 5.3 7.7 ( 7.3 6.9 7.1 7.6 1 7.1 6.6 6.5 6 . 8 ) 7.2 6.9 7.2 7.7 Source:Authors' estimates.Note: (*) Estimates or preliminary (updated) for 108.Updates to Table 2 in ISN documentare presented in bold. Annex 4. International Cooperation: Commitmentsand Disbursements(in thousandsof US$) GTZ 99,211 0 99,211, 48,016 5,143 53,159 46,052 Denmark 97,599 0 97,599 41,474 5,505 46,979 50,620 Spain 82,395 0 82,395 59,887 0 59,887 22,508 Others 555,569 24,743 580,3 12 466,826 9,941. 476,767 103,545 BOLIVIA INTERIM STRATEGY NOTE FY2009-FY2011 EXECUTIVE SUMMARY i. In 2005, Evo Morales Ayma became the first elected President of indigenous origin in Bolivia's history as a democracy. President Morales was elected with a clear majority and continues to have the backing of the bulk of the Bolivian population. He ran on a campaign promising the effective participation of the poor and groups that have been excluded for centuries, and to transform Bolivia's society by means of redistribution of wealth from the country's rich natural resources. His administration has initiated a broad process of change intended to transform the country's politics, economy, and society, to move it towards a pluri-national state, as described in the new Constitution. ii. The political situation in Bolivia remains as fluid as it was three years ago when the 2007-2009 Interim Strategy Note (ISN) was designed. The Government's efforts to implement promised changes are underway, although with significant delays due to lengthy political discussions and processes. In particular, the implementation of a new Constitution--enacted in February 2009--requires significant changes to the overall regulatory framework. These changes will have to be made in a context where achieving consensus across key political actors has proven complicated and time consuming. The complexity of the situation is compounded by the general elections and regional autonomy referenda in five regions in December 2009, the subnational governments' elections in April 2010, as well as the impending impact of the global financial crisis. iii. Bolivia is one of the poorest countries in Latin America and has one of its highest levels of inequality. The reduction in poverty rates experienced in the 1990s when Bolivia had modest but consistent growth rates was reversed by external and internal shocks at the end of the millennium. The per capita Gross National Income (GNI) amounted to US$1,260 in 2007, and the United Nations Development Program (UNDP) ranked Bolivia 117th (out of 177 countries) on its Human Development Index. These results are strongly associated with the country's meager long-term economic performance. In addition, uneven distribution and poor quality of social services-- particularly health and education--have disproportionately affected indigenous and rural populations. iv. The Government of Bolivia (GoB) has requested support from the World Bank Group (WBG) in its efforts to reduce poverty, particularly extreme poverty. To achieve this overarching objective, the Government has asked that the priority for the next WBG strategy in Bolivia be to consolidate the progress made in the three pillars supported by the previous ISN--which focused on good governance, job creation through growth, and improved public service provision--and to complement them with an additional pillar that focuses on sustainable development. The latter would focus on i managing, mitigating and/or reducing the negative economic impacts of climate change. v. The Government and the WBG agree that a two-year ISN continues to be the most appropriate instrument to sustain and deepen the Bank's long-term support to Bolivia's development priorities, as laid out in the National Development Plan (NDP). This approach is consistent with the 2005 Country Assistance Evaluation (CAE) recommendation to use shorter development strategies under changing conditions. This ISN covers FY2010 to FY2011--a period defined by the Government as a transition period for the country. The Bank expects to move to a longer term strategy after this period, assuming the political and economic contexts are conducive and implementation capacity has improved. Progress on the governance pillar will be essential for this shift to take place. vi. The Country Strategy continues to be one of selectivity and flexibility. Following the lessons learned and the CAE recommendations, the Government and the Bank agreed that the new Country Strategy should identify fewer lending operations with larger amounts of financing to optimize the development impact of the projects and achieve economies of scale. There is also agreement that implementation of previously approved projects should be a priority during this ISN. The interventions take into account complementarities with other donors, and focus on a medium-term engagement horizon. vii. The overall size of the International Development Association (IDA) envelope during the ISN period is expected to be approximately US$137 million. Approximately US$47 million of the IDA 15 allocation has not been allocated into any specific operation, to provide the required flexibility to respond to changing demands due to the evolving global crisis, and the uncertain political and economic environment. The Bank will also provide support to Bolivia through a significant program of technical assistance and Economic and Sector Work in key areas where weaknesses have been identified by the Government--social protection, public sector governance, education quality, and poverty reduction, for example. viii. International Finance Corporation's (IFC) investment strategy is based on the selective provision of financing, complemented by a significant program of Advisory Services. Selective financing will focus on viable, high-impact projects in sectors such as financial markets (Small and Medium Enterprises banking, microfinance and trade finance), agribusiness and forestry, as well as technical assistance and capacity building in areas of business enabling environment, access to finance and enhancing local benefits (primarily for extractive industries). If opportunities arise, IFC will stand ready to assess investment and advisory prospects in infrastructure and extractive industries sectors provided a conducive investment environment is in place. The new ISN is a joint effort of IDA and IFC. ix. The successful implementation of the ISN is subject to economic, political, and legal risks. Specifically, the main risks are related to the impacts of the ongoing global crisis, the evolving political situation, and to the country's weak capacity for project ii preparation and implementation. Bolivia enjoyed the benefits of exceptional external conditions until the end of 2008, but the worsening global economic outlook is starting to affect its economy. The nationalization process might also discourage private investment. In this context, the promotion of dialogue between the private sector and the Government to explore possible public-private partnerships would be helpful to increase the potential to attract private capital. x. The proposed Strategy takes into consideration the risks facing both the country and the WBG. Flexibility has been designed into the strategy to allow the Bank to quickly react to the risks resulting from the evolving political and economic conditions in the country. The WBG, in coordination with the Government of Bolivia, has the option of recasting the two-year program, modifying projects and Economic and Sector Work accordingly. xi. In addition, the World Bank will continue to maintain a close dialogue with the Government in order to provide assistance on macroeconomic issues in a deteriorating international context. Four projects in the active portfolio help mitigate the crisis impacts by supporting rural producers. The Bank also supports safety nets through a government conditional cash transfer program (Zero Malnutrition), supplemented by the third health Adaptable Program Loan (APL). As the magnitude and duration of the impacts stemming from the global crisis are still unknown, this Interim Strategy Note is expected to provide the flexibility to adjust to the evolving circumstances, and allow the Bank to respond to additional development priorities and needs that may arise. iii BOLIVIA INTERIM STRATEGY NOTE FY2010-2011 I. INTRODUCTION 1. In 2005, Evo Morales Ayma became the first elected President of indigenous origin in Bolivia's history as a democracy. President Morales was elected with a clear majority and continues to have the backing of the bulk of the Bolivian population. He ran on a campaign promising the effective participation of the poor and groups that have been excluded for centuries and to transform Bolivia's society by means of redistribution of wealth from the country's rich natural resources. His administration has initiated a broad process of change intended to transform the country's politics, economy, and society, to move it towards a pluri- national state, as described in the new Constitution. 2. The political situation in Bolivia remains as fluid as it was three years ago when the 2007-2009 Interim Strategy Note (ISN) was designed. The Government's efforts to implement promised changes are underway, although with significant delays due to lengthy political discussions and processes. In particular, the implementation of a new Constitution-- enacted in February 2009--requires significant changes to the overall regulatory framework. These changes will have to be made in a context where achieving consensus across key political actors has proven complicated and time consuming. The complexity of the situation is compounded by the general elections and referenda on regional autonomy in five regions in December 2009, the sub-national governments' elections in 2010 of governors in departments that approved regional autonomies, as well as the impending impact of the global financial crisis. 3. The Government of Bolivia (GoB) has requested support from the World Bank Group (WBG) in its efforts to reduce poverty, particularly extreme poverty. To achieve this overarching objective, the Government has asked that the priority for the next WBG strategy in Bolivia be to consolidate the progress made in the three pillars supported by the previous ISN--which focused on good governance, job creation through growth, and improved public service provision--and to complement them with an additional pillar that focuses on sustainable development. The latter would focus on managing, mitigating and/or reducing the negative economic impacts of climate change. 4. The Government and the WBG agree that a two-year ISN continues to be the most appropriate instrument to sustain and deepen the Bank's long-term support to Bolivia's development priorities, as laid out in the National Development Plan (NDP). This approach is consistent with the 2005 Country Assistance Evaluation (CAE) recommendation to use shorter development strategies under changing conditions. This ISN covers FY2010 to FY2011--a period defined by the Government as a transition period for the country. The Bank expects to move to a longer term strategy after this period, assuming the political and economic contexts are conducive and implementation capacity has improved. Progress on the governance pillar will be essential for this shift to take place, including progress in social control. 1 II. COUNTRY CONTEXT 5. The WBG has been Bolivia's partner since 1964 and has supported the country in its efforts to reduce poverty and promote economic growth through periods of high social unrest and political uncertainty. In the past decade, Bolivia has experienced severe political and social instability. To provide the flexibility and adaptability required under those conditions, the Bank has made use of shorter development strategies and switched to a two- year Country Assistance Strategy (CAS) for the FY2004-2005 period. 6. Building on this strong partnership, the Board approved in November 2006 an Interim Strategy Note for the period FY2007-2009. That strategy was designed to provide continued support to Bolivia's development needs while the incoming Government moved forward in formulating a National Development Plan. Following a pragmatic approach and a systematic process of trust building, the portfolio of projects was rebuilt over the past two years. These have been supported by relevant Analytical and Advisory Activities that have contributed to the public-policy debate on critical development issues, such as the informal sector, social protection, and trade and export diversification. The implementation of the strategy reinforced the long-term commitment of the WBG to Bolivia and its role as an honest broker in its support to the Government in critical development efforts such as improving the living conditions of vulnerable populations and promoting sustainable and equitable growth. 7. Nevertheless, the country's progress in reducing poverty and promoting inclusion is yet to show deeper, sustainable results. Inequality and poverty levels continue to be among the highest in Latin America. Additional efforts are required to improve the living conditions for Bolivians, particularly in the context of the prevailing fragile social and political environment. The rapidly worsening external environment makes sustained support from the WBG, under the Government's leadership, both as a source of financing and of international development experience, even more important. 8. The current Administration has shown continued commitment to reducing poverty and exclusion, and has requested support from the World Bank for these efforts. The new ISN will enable the Bank to support the long-term development objectives of the country in consensus areas where there is common ground with the Government's approach. It will also provide the flexibility needed to operate in a constantly evolving political environment, complicated by the still uncertain impact of the global financial crisis in Bolivia. III. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS A. Political Developments 9. The start of Evo Morales' presidential term in January 2006 brought a reduction of Bolivia's severe political and social instability. For the first time in Bolivia's history, a representative of the majority indigenous groups, strongly committed to move forward the poverty and inclusion agenda, was in power, enhancing the prospects of a reversal in the country's level of inequality. 2 10. However, tensions reemerged over the constitutional reform process. The first draft of the new Constitution sought to consolidate the central government's control over critical issues, such as natural resources, land administration and expenditure allocation, and promoted lower levels of departmental autonomy than those desired by the lowland regions. It also allowed President Morales to be a candidate for two additional consecutive presidential elections. This increased tensions between President Morales' supporters and significant segments of the population of the resource-rich lowlands in the eastern part of the country. 11. Regional referenda on the autonomy process took place in response to the approval of the new constitutional draft in December 2007. Four out of nine departments-- the so-called Media Luna (Santa Cruz, Beni, Pando, and Tarija)--unilaterally advanced their autonomy processes, led by their departmental and civic authorities. They carried out referenda to approve their Autonomy Statutes. A subsequent recall referendum to decide whether President Morales and eight departmental Prefects should remain in power took place on August 10, 2008. The result implied no major changes in the political setting, as President Morales received overwhelming support and the main opposition Prefects in the Media Luna were also ratified. However, two opposition Prefects (for La Paz and Cochabamba) lost the referenda and have been replaced by new Prefects appointed by President Morales. 12. The increased polarization and isolated violence that followed were eventually reduced through an agreement between the ruling party and the political opposition in the Senate. Following the recall referendum, polarization increased, triggering violent clashes as both sides tried to advance their divergent agendas. However, in October 2008, an agreement to modify the Constitution was reached between representatives of Congress. Among other things, the agreement (i) limits President Morales' options to running for only one additional term (elections are planned for December 2009); (ii) recognizes departmental, municipal and indigenous autonomies (a new set of sub-regional autonomy referenda are scheduled for July 2009), and provides them with legislative powers; (iii) removes the option of applying new rural landholding/farm size ownership limitations retroactively; (iv) applies community justice--based on indigenous rules and practices--only to community members; and (iv) requires two thirds of congressional votes for future constitutional reforms. 13. The evolving political and regulatory environment makes the option of a Country Partnership Strategy that covers a longer period of time difficult at this juncture. As a result of the January 2009 referenda, the new Constitution was approved by 62 percent of the voters and was enacted in February 2009. The referenda included a vote to decide on the maximum size of land property allowed in rural areas, and as a result, the limit for future land acquisitions was set to 5,000 hectares. Bank supported projects will not be affected by this limit, since its implementation will not be retroactive and, in any case, the communities targeted by the land operation supported by the Bank are below the size limit set. However, the approval of the Constitution implies that elections for President and Congress will be held in December 2009, and elections for Governors and Mayors in April 2010. Additionally, referenda on political, administrative, and economic regional autonomy will be part of the December 2009 elections, in those regions that rejected the regional autonomy in 2006. In addition, a process to modify current legislation and adapt regional legislation to the new Constitution has been initiated. The new Constitution introduces new challenges for the design 3 of a long term country strategy since the political agreements needed to implement the Constitution may prove difficult to reach in an election year. 14. Good public sector governance has been critical to Bolivia's development, but significant challenges remain. Public revenues are unequally distributed across departments and municipalities, partly due to the imbalanced distribution of transfers from hydrocarbon revenues. Unequal access to services by citizens of different social backgrounds or geographical location continues to severely limit inclusion. Weak accountability exists within the administration and vis-à-vis the citizens, thus generating opportunities for corruption. The public sector would benefit from a stronger capacity to establish priorities, design, coordinate, and implement programs and public services. Improvements in these areas will be essential to move to a longer term strategy. The Government of Bolivia has recently given strong signals that it is starting to address these issues. In particular, a new Ministry of Institutional Transparency and Fight against Corruption has been created with a mandate to apply the zero tolerance policy against corruption established in the NDP. 15. In this complex political context, the World Bank Group partnership with Bolivia remains strong. The Government continues to seek the Bank's support and expertise to address Bolivia's development challenges. Eight new IDA projects were approved over the last two years and the Government is proactively engaged in the design of the new strategy. However, the complexity of the operating environment should not be underestimated. B. Poverty, Inequality, and the Millennium Development Goals (MDGs) 16. Bolivia is one of the poorest countries in Latin America and has one of its highest levels of inequality. Latest figures1 from UDAPE (the Government's Unit of Economic and Social Policy Analysis) indicate that, in 2007, 60.1 percent of the population is poor, and 37.7 percent is extreme poor. Inequality, as measured by the Gini coefficient is 0.56, one of the highest in Latin America, which is one of the most unequal regions in the world. The situation is even more serious in rural areas, where moderate poverty reaches 77.3 percent of the population, extreme poverty 63.9 percent, and the Gini coefficient is 0.64. Similarly, indigenous populations endure above average poverty levels, with 66.5 percent and 47.4 percent of moderate and extreme poverty, respectively. 17. The reduction in poverty rates experienced in the 1990s when Bolivia had modest but consistent growth rates was reversed by external and internal shocks at the end of the millennium. The per capita Gross National Income (GNI) amounted to US$1,260 in 2007, and the United Nations Development Program (UNDP) ranked Bolivia 117th (out of 177 countries) on its Human Development Index. These results are strongly associated with the country's meager long-term economic performance. In addition, uneven distribution and poor quality of social services--particularly health and education--have disproportionately affected indigenous and rural populations. 1Official figures are not public yet. 4 18. However, poverty rates decreased in the last few years as a result of sustained moderate growth. Poverty declined from 66.4 percent in 2000 to 60.1 percent in 2007. Extreme poverty also declined from 45.2 percent in 2000 to 37.7 percent in 2007. Similar reductions have also been observed in rural areas and among indigenous peoples. While poverty remains very high, these are important gains that need to be protected as global and local conditions regress. 19. Further efforts are needed if Bolivia is to reach the Millennium Development Goals (MDGs) by 2015. According to the Fifth MDG Progress Report prepared in 2008 by UDAPE, Bolivia expects to reach most of the MDG targets by 2015 (see Table 1). But for this to happen, it is essential to accelerate the reduction of poverty, improve income distribution, and address the needs of the excluded population through well-targeted, efficient programs, in both the social and productive sectors, to build human capital and promote income generation. Moreover, this report was prepared before the international financial crisis outbreak and does not consider its impact to the MDGs and the increasing risks of setbacks in critical goals, such as infant mortality and malnutrition. According to a preliminary report of the 2008 Health and Demography Survey, 21.8 percent of children under five suffer from chronic malnutrition. In rural areas, this indicator reached 32.5 percent and among parents with no education it reached an alarming 44.2 percent. Only 57.7 percent of mothers in rural areas received prenatal healthcare and only 60.5 of all mothers in Bolivia were adequately protected against tetanus. During the last five years only 65.8 percent of all births were attended by trained health personnel, and in rural areas this indicator reached only 41.6 percent. The net enrollment rate in pre-primary school was just 38 percent in 2007, and while the net enrollment rate in primary school reached 92 percent, Bolivia's 57 percent net enrollment rate in secondary school is a pending task in the sector. 20. In this regard, a recent study by UNDP and the World Bank finds that achieving the goals on elementary education, child/maternal mortality, and water/sanitation would require an extra 1.7 to 2.8 GDP points in expenditures per year.2 This calls for large financial support that cannot be fully met by internal resources. The Government is aware of these social needs and has launched broad social policies to tackle poverty and inequality. Specifically, steps have been taken to strengthen the social protection framework and to improve the provision and distribution of social services, particularly in rural areas. A new strategy to fight extreme poverty, rolling out interventions in targeted areas, is being put in place by the Government. 2See Jiménez, W., Mariscal M. and G. Canavire (2008) Capitulo 5 in Vos, R.; Ganuza, E.; Lofgren, H.; Sánchez, M.V. and Díaz-Bonilla, C. "Políticas Publicas para el Desarrollo Humano: ¿Cómo lograr los Objetivos de Desarrollo del Milenio en América Latina y el Caribe", PNUD, UN-DESA, The World Bank. The simulations correspond to the expenditures needed for the period 2000-2015. The base scenario assumes an annual GDP growth of 3.56 percent for the whole period 2000-2015. Expenditures in health and education grow at 3.00 and 2.00 percent respectively, while expenditures in water, sanitation and infrastructure grow at a 2.35 percent per year. These rates are based on the historical evolution of these items in Bolivia. Baseline expenditures as a percentage of GDP for each sector are not reported in the study. According to official figures, public expenditure on education, health, and basic sanitation in 2007amounted to 5.2, 3.1, and 0.4 percent of GDP respectively. 5 Table 1. MDGs's Progress and Projections to 2015 circa Latest (circa 2015 GoB 2015 Projected Goal 1990 2006/7) projection MDGs to meet? 1 Extreme poverty rate 48% 38% 22% 24% YES 2 Chronic malnutrition <5yrs 38% 26% 0 19% YES 3 Net primary enrollment 93% 95% 100% NO 4 Illiteracy cohort 15-24 yrs 1.5% 0 0 YES 5 Gender discrimination Primary completion gap -0.6 0 MET Secondary completion gap -1.5 0 MET Labor market empt ratio 17% 50% NO Politics rep ratio in Congress 19% 50% NO 6 Infant mortality 81/1000 54 27 27 YES 7 Maternal health Mortality 416/10K 229 104 104 YES Institutional birth cover 65% 70% 70% YES 8 AIDS infection rate/ million pop 19 13 13 YES Transmissible disease 9 management Malaria per 1000 population 5.2 2 2 YES Municipalities with Chagas > 3% 30.4 0 0 YES TB cases cured 76% 85% 95% NO 10 Environment Forest cover 48% 48% 48% YES % of country in National Parks 17% 17% 17% YES Potable water cover (% pop.) 58% 73% 82% 79% YES Sanitation cover (% pop.) 28% 56% 71% 64% YES Source: Based on UDAPE, 2008: 5th Progress Report on the MDGs in Bolivia. Pp22-23 C. The Economic Context and the Impact of the Global Financial Crisis C.1 Recent economic developments 21. Over the last few years, Bolivia has enjoyed the benefits of exceptional external conditions that, despite the current international crisis, persisted until the end of 2008. This generated an export boom--primarily led by hydrocarbons, but also including mining-- that strengthened the external and fiscal position and boosted performance. Large external current account surpluses--close to 12.1 percent of GDP in 2008--led to an impressive accumulation of international reserves that equaled 19 months of good imports at the end of 2008. The main factors behind this outcome were strong export increases, from US$2.8 billon in 2005 to over US$6.3 billion in 2008, and the upsurge of remittances, from US$178 million in 2004 to near US$900 million in 2008. Additionally, due to the Multilateral Debt Relief Initiative (MDRI)3, the external public debt was reduced from 52 percent of GDP at the end of 2005 to only 14 percent at the end of 2008. As international oil prices have a three-month 3Approximately US$3 billion in debt was written off by the World Bank (US$1.5 billion), the IADB and the IMF. 6 lagged effect on Bolivian gas export prices, the recent oil price reversal only started having an impact on the Bolivian economy in the first quarter of 2009. 22. The high oil prices, plus changes in the hydrocarbons taxation regime, turned Bolivia's customary fiscal deficits into surpluses. Fiscal surpluses reached 4.6 percent of GDP in 2006, 1.7 percent in 2007, and may have reached 5.5 percent in 2008. Increased government revenues allowed for higher public capital formation, which went from 6.9 percent of GDP in 2005 to around 9.3 percent in 2008. Despite new or increased expenditures linked to widespread social programs, nationalization costs, new public enterprises, and subsidies on hydrocarbon derivatives and basic food items, the Government maintained control over current expenditures. 23. Economic growth also improved in recent years, even though private investment remained low. GDP growth reached 4.6 percent in 2007 and accelerated to an estimated of 6.1 percent in 2008, thanks to higher exports, public investment, and private consumption. However, private investment has remained low at only 7.0 percent of GDP in 2008, partially inhibited by the uncertain political environment and the nationalization process in the hydrocarbon, telecom, mining, and water sectors. Although the state-owned oil and gas company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) has signed new contracts with all foreign companies in the sector, no new significant investments have taken place, and this may affect future supply. In addition, no new significant expansions have been initiated in the mining sector or in power generation, where electricity demand is reaching supply capacity. 24. After a decade of price stability, inflation increased significantly since mid-2007, although the trend has recently reversed. This is explained by rising global food prices, large flooding in agricultural areas that reduced domestic supplies, and increased aggregate demand related to growing remittances and public expenditures. Inflation reached 17 percent in the first half of 2008 but decelerated to 11.8 percent at the end of 2008. The upsurge took place despite large open market operations to dampen demand, the exchange rate appreciation allowed by the Central Bank (which also helped to notably reduce financial dollarization), and ad hoc policies applied by the Government that include temporary export prohibitions and reduction of import tariffs. This trend was recently reversed in the context of the global economic crisis. C.2 The international crisis and Bolivian economic outlook 25. The rapidly worsening global economic crisis is gradually starting to affect the performance of the Bolivian economy. While Bolivia is likely to be affected through the traditional channels (financial, trade and remittances), there will be important differences in the impact of each channel. In effect, the financial channel, which is rapidly affecting other countries, will have a limited effect on the Bolivian economy, but the second round effects will hit Bolivia harder through commodity prices and remittances downturn. 26. The crisis is likely to have a limited direct impact in Bolivia through the financial channel. Bolivia is not significantly exposed to international financial markets given that foreign direct investment (FDI) is low (less than 2 percent of GDP in recent years), and multilateral and bilateral creditors and donors cover almost all external financial requirements. 7 In addition, while maintaining access to only small credit lines with foreign financial institutions, the domestic financial sector has high liquidity levels, thanks to a faster increase in deposits than credits during the last few years. Moreover, in the last few years Non Performing Loans (NPL) were reduced and high capital adequacy ratios were maintained. The Central Bank accumulated a significant amount of international reserves in recent years allowing the Government to respond to an eventual increase in the demand for US dollars linked to pressures (albeit moderate) to devaluate the local currency. This contrasts with most of Bolivia's trading partners, which have already seen their currencies devalue. No significant capital outflows and losses of international reserves took place in late 2008, despite some backtracking in the financial de-dollarization trend triggered by the uncertainty of the impact of the global financial crisis. 27. However, the fall of gas and mining export receipts and the fall of remittances will have a more lasting effect on Bolivia's economic performance. Gas exports are beginning to fall due to the decline in oil prices, affecting fiscal and external balances. Gas exports represent about half of total exports and one-third of total current fiscal revenues. The fall of mining commodity prices (one-third of total exports) and the reduction of remittances (7 percent of GDP in 2007) will also have a significant impact on the external current account. In addition, the suspension of Bolivia's participation in the Andean Trade Promotion and Drug Eradication Act (ATPDEA) and real appreciation will negatively affect non-traditional export performance, unless non traditional partners such as Venezuela and others are able to compensate for the decline in US demand. The impact on Bolivia's fiscal and external accounts is expected to be significant but, on the fiscal side, past surpluses provide some room to mitigate these effects. 28. Bolivia's impact from the global economic slowdown could be compounded by the low levels of investment in the energy sector. Bolivia is a significant exporter of hydrocarbons, especially natural gas. Due to low levels of investment in the electricity, and oil and gas sectors, energy supply has started to be a concern. Limited gas availability might delay necessary investments in thermo-generation. Additionally, low levels of investment in the oil sector may result in shortages in the supply of diesel oil, liquefied petroleum gas (LPG) and other oil derivatives. This situation might have an adverse effect on Bolivia's ability to meet export commitments to Argentina and Brazil. 29. There is a significant risk of backtracking from recent gains in poverty reduction due to the potential effects of the global crisis. The reduction in the fiscal and current account surpluses that will result from a fall in commodity prices and exports will have an adverse impact on Government revenues, and therefore, on transfers to sub-national governments. This situation can affect the availability of resources to support important programs that protect the most vulnerable populations. Additionally, families benefiting from the upsurge of remittances in previous years might see their income decline. Unemployment and poverty levels are likely to rise, and malnutrition indicators could deteriorate further. Bolivia has one of Latin America's highest and stagnant rates of chronic malnutrition, which affects 27 percent of children under 5 and over 50 percent of indigenous children. 30. The near-term outlook for Bolivia has been changed by the impending impact of the global crisis. Table 2 shows Bolivia's economic outlook under three scenarios. The base 8 scenario main hypothesis is a fall in the price of oil from US$100 average per barrel in 2008 to US$55 in 2009, gradually recovering to US$75 by 2012. This scenario also assumes that mining prices drop by 40 percent and remittances decrease by 25 percent in 2009. A reduction of 5 percent in mining export volumes is assumed as some projects would close, but no reduction of gas export volume is considered as total energy requirements from Brazil and Argentina are expected to remain higher than the current supply, (at least in the next few years), and investments to maintain the supply will stay at the same level than in recent years. As the crisis may reduce the willingness to invest, and investments related to large mining projects concluded in early 2008, it is assumed the FDI will fall in 2009, but will slowly recover thereafter when new activities are initiated through State alliances in strategic sectors­ mining and hydrocarbons, in particular. Regarding policy interventions, it is assumed that the Government will be able to increase public investment to mitigate the effect of the crisis and that the Central Bank will maintain its anti-inflationary monetary policy and allow depreciation. Under this scenario, economic growth could fall from 6.1 percent in 2008 to about 3.1 percent in 2009, modestly recovering up to 3.7 in 2012. Inflationary pressures would gradually recede due to both weaker demand and the decline in international food prices, reducing inflation from 11.8 percent in 2008 down to 5.2 percent in 2012. The large current account surplus expected in 2008 would turn into a deficit of 1.9 percent of GDP in 2009, but would become again a surplus in 2010 as commodity prices recover. The 5.5 percent GDP fiscal surplus reached in 2008 would turn into a deficit of 3.7 percent of GDP in 2009 that would gradually approach balance in 2012. Table 2. Key Economic Indicators, 2007-2011 2007 2008* Base case Low case High case 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 (Annual growth) Growth Rate of GDP 4.6 6.1 3.1 3.5 3.7 3.7 2.6 2.8 3.0 3.1 3.6 3.9 4.1 4.1 Inflation (e.o.p.) 11.7 11.8 7.0 5.2 5.2 5.2 6.4 5.2 5.2 5.2 8.1 6.3 5.2 5.2 Devaluation Rate (e.o.p.) -4.5 -7.8 0.5 8.5 5.7 5.6 0.5 8.5 5.7 5.6 0.5 8.5 5.7 5.6 (Percentage of GDP) Investment 16.1 16.3 17.6 17.3 17.3 17.4 17.3 17.1 17.1 16.8 19.5 18.8 18.8 18.9 Public 9.4 9.3 10.9 10.1 10.1 10.1 10.4 9.9 9.8 9.7 10.8 10.0 9.9 9.9 Private 6.7 7.0 6.7 7.2 7.2 7.3 7.0 7.2 7.2 7.1 8.7 8.9 8.9 9.0 Overall fiscal balance 1.7 5.5 -3.7 -1.8 -1.0 -0.6 -3.8 -3.8 -2.3 -0.9 -3.7 -1.8 -1.0 -0.7 Primary fiscal balance 4.2 7.4 -2.0 -0.3 0.5 0.9 -2.2 -2.2 -0.7 0.8 -2.1 -0.2 0.5 0.8 Current account 12.1 12.1 -1.9 0.5 1.3 1.5 -2.7 -2.3 -0.8 0.9 -3.9 -1.4 -0.6 -0.4 Good exports 34.0 36.8 21.9 23.3 23.9 24.2 21.2 21.1 22.7 24.1 21.7 22.7 23.1 23.3 Good imports 26.3 28.2 26.7 25.1 24.9 24.7 26.8 25.8 25.6 25.1 28.2 26.3 25.7 25.3 Foreign direct investment 1.5 2.4 0.3 0.4 0.8 1.0 0.3 0.4 0.8 1.0 2.0 1.9 2.1 2.1 (US$ billion) Net international reserves 5.3 7.7 7.3 6.9 7.1 7.6 7.1 6.6 6.5 6.8 7.7 7.3 7.5 8.0 Source: Authors' estimates. Note: (*) Estimates or preliminary. 31. Considering the recent behavior of oil prices, a downside risk scenario was developed. Oil prices have remained below US$50 per barrel since late November 2008, and concerns are growing about further reductions as a result of the worsening global economy. In this context, estimates are provided for a low-case scenario that assumes that oil prices will fall further to an average of US$45 per barrel in 2009-10 and recover up to US$70 in 2012. Under this scenario, economic growth could fall to 2.6 percent in 2009 remaining near 3.0 percent up to 2012. The current account surplus would turn into a deficit of 2.7 and 2.3 percent of GDP in 2009 and 2010 gradually reverting in the following years. The fiscal deficit would be 3.8 9 percent of GDP in the following two years. However, improvement in international oil prices would allow a significant reduction of fiscal deficit afterwards. 32. A third scenario was also estimated, taking into consideration a more dynamic private investment environment. A number of important investment projects were announced and promoted by the Government in the last few years, in particular in mining and in the hydrocarbon sector--among them El Mutún, a very large iron mining project, and agreements reached with Venezuela, Argentina, Brazil, Russia and Iran to boost hydrocarbon output. In this regard, the high-case scenario assumes that these efforts will result in increasing private investment, despite the crisis and the effects of the nationalization process. In this scenario, growth could reach 3.6 percent in 2009 and remain close to 4 percent thereafter. However, it is assumed that those investments that have long maturity periods would affect mining and hydrocarbon export volumes only after the projection period, and so they do not have a significant impact on fiscal accounts. 33. In the context of the global economic crisis, the Government is preparing a package aimed at reducing its potential impact. The package includes an employment emergency plan, a mining stabilization fund (which compensates small zinc producers when international prices go below a certain threshold), a new US$100 million productive fund to support small producers, and a significant boost in public investment. The Government is seeking to increase capital expenditures as a counter-cyclical measure. However, if the effects of the crisis are worse than expected, the Government is willing to streamline its capital expenditures to avoid further deterioration of the fiscal balance. A US$1 billion credit from Bolivia's Central Bank to YPFB was included in the 2009 draft budget to boost investment in the energy sector. 34. The Bank is supporting the Government's efforts through the active portfolio and with technical assistance in the design of the new Government strategy targeting the extreme poor. In addition, the World Bank will continue to maintain a close dialogue with the Government in order to provide assistance on macroeconomic issues in a deteriorating international context. Support to the Government to mitigate the impact of the crisis and to generate higher incomes to poor rural producers through the active portfolio includes: (i) the ongoing Rural Alliances Project (US$28.4 million), which allocates 80 percent of project investments to agriculture production for domestic market consumption, benefiting the producers. Although the impact in the aggregate domestic market is not significant, there is a considerable benefit for producers and consumers in the regions where it is being implemented. By allocating the major share of investments to food production, the project is contributing to improve the incomes of the poorest populations, which could shield them from the impacts of the crisis; (ii) an Additional Financing for the Rural Alliances Project (US$30 million) which is expected to benefit 29 more municipalities; (iii) the Participatory Rural Investment Project II (US$20 million), which targets poor regions with great productive potential. By supporting productive infrastructure and management capacity, agricultural production is expected to grow thereby increasing the incomes of the targeted populations; (iv). the Decentralized Infrastructure for Rural Transformation (US$20 million), which provides alternative energy mechanisms (solar panels) to remote areas, and might help reduce, although not significantly, pressures on energy demand. Depending on performance and Government priorities, a second 10 phase of the Decentralized Infrastructure for Rural Transformation is being considered under this ISN. 35. In terms of safety nets, the Bank is supporting Bolivia through the Government's Zero Malnutrition program and the Youth Employment program. The Zero Malnutrition initiative includes a well targeted Conditional Cash Transfers (CCT) program that provides incentives for families to take their children to the health centers for periodic nutritional monitoring and counseling. Over the next three years, this program will reach 45,000 families--primarily indigenous families in the rural Altiplano. However, the scope of the program is limited, with many needy communities excluded, and the benefit has been falling in real value due to food inflation. The Health APL III will support the supply of health services in the communities targeted by the CCT program. The Bank is exploring with the Government ways to secure additional financial support to expand the scope of the Social Protection Project that supports the CCT nutrition program and the youth employment program. The Bank is also assisting the Government in the design of a new strategy to fight extreme poverty, rolling out interventions in targeted areas, and in the design of a measurement of the concept of "Vivir Bien"--a type of multidimensional welfare measure. 36. As the full impact of the global crisis to Bolivia is still unknown, this Interim Strategy Note is expected to provide the flexibility to adjust to the evolving circumstances. Preliminary discussions with the Government included the possibility of allocating US$90 million into a defined program for FY2010-2011 under this ISN. The remaining US$47 million of Bolivia's IDA 15 allocation will be available for flexible use, allowing the Bank to respond to additional development priorities and needs that may arise as a result of the international crisis. IV. THE GOVERNMENT'S DEVELOPMENT PLAN 37. In May 2006, the Government launched its National Development Plan with a strong focus on improving poverty reduction and inclusion. The NDP is based on four pillars: (i) Bolivia Productiva (Productive Bolivia); (ii) Bolivia Digna (Dignified Bolivia); (iii) Bolivia Soberana (Sovereign Bolivia); and (iv) Bolivia Democratica y Parcipativa (Democratic and Participative Bolivia). Bolivia Productiva seeks to increase the role of the state in strategic sectors--primarily natural resources and utilities--while boosting labor- intensive sectors and integral territorial complexes through financial and technical support. Bolivia Digna includes social programs--such as redistributive transfers and safety nets--to fight poverty and exclusion. Bolivia Soberana seeks greater country ownership of Bolivia's development process without external influences on policies, strengthened status in international fora through the maintenance of balanced relations with other countries, and self sufficiency in food and energy production. Bolivia Democrática y Participativa redefines power relations, transferring political power to social and indigenous movements. 38. The NDP proposed higher Government participation in key sectors--such as hydrocarbons, mining, telecommunication and energy--by either increasing the Government's take or nationalizing previously privatized enterprises. Over the last two years, the Government has taken ownership of a number of telecommunications, mining and 11 hydrocarbon-related firms. Hydrocarbon joint ventures have been turned into service contracts, and the Government has taken control over the refinement, transport and marketing activities. At the same time, the Government has increased the tax burden on the mining sector. 39. The Government intended to use the resources generated to invest in labor- intensive sectors and to promote social equality and inclusion. The NDP proposes to channel the additional resources generated by this increased State participation, into labor- intensive sectors such as manufacturing, tourism and agriculture, or into additional financing for social programs. In parallel, political power would be redistributed through the constitutional reform to benefit traditionally excluded groups, and extensive social programs to favor the poorest and most vulnerable (particularly indigenous populations). 40. However, planned public investments have not materialized, and the nationalization policy has discouraged private investment. The Government was not able to use these additional resources to kick-start labor-intensive sectors because they were needed to cover, among other things, costs related to the nationalization process. In addition, the impact of credits from the second-tier public Productive Development Bank (BDP for its acronym in spanish) has been negligible despite their low interest rate. The BDP was expected to channel financial resources from strategic sectors, such as gas and mining, into productive activities. The Government's agenda in the productive sector still needs to appropriately balance private and public concerns in a manner conducive to attracting the private investment flows needed for growth and poverty reduction. The effects of the nationalization policies on the business climate are likely to have long-term impacts on the growth and sustainability of the hydrocarbon sector. 41. Nevertheless, increased fiscal revenues enabled the implementation of several social programs, including Bono Juancito Pinto, a cash-transfer program contingent on school attendance; Renta Dignidad, an enhanced non-contributory pension for the elderly based on previously existing Bonosol; and Yo Sí Puedo, an adult literacy program. In addition, the Government has launched the ambitious Zero Malnutrition Program to be implemented in the most vulnerable municipalities. The Social Protection and Integrated Community Development Network program will integrate social assistance to vulnerable populations and productive development in rural and peri-urban areas. The Government is also finalizing a National Plan of Basic Sanitation for the period 2008-2015, which focuses on sustainable management, increased coverage, and reduction of unequal access. The Government plans to coordinate existing social protection programs through integrated information systems and an integrated beneficiary registry. 42. In September 2008, the Government started the design of an overarching program to eradicate poverty in order to address delays in reforms for key sectors. In the education sector, reforms lost momentum when agreements could not be reached with teacher unions. A proposed Universal Health Insurance program backed by the Government has been delayed because sub-national governments rejected the proposed financing mechanism. In this context, an overarching program to eradicate extreme poverty is being developed, building multi-sector initiatives to be implemented in the most vulnerable municipalities. The Government expects to present this strategy in the next few months. 12 V. PROGRESS IMPLEMENTING THE WORLD BANK GROUP'S STRATEGY A. IDA Program 43. The country portfolio was rebuilt during the FY2007-2009 ISN, discussed at the Board in November 2006 and endorsed by Bolivia's current Administration. The portfolio increased from five projects at the end of FY2007 to 11 by the end of FY2008, committing all of the IDA 14 resources allocated to Bolivia. The previous ISN focused on three pillars: (i) good governance and anti-corruption; (ii) job creation through inclusive growth; and (iii) social inclusion through improved public service provision. It followed a pragmatic approach by identifying areas of mutual agreement prioritized by the Government where the Bank's contribution could be most effective, in a period of political, economic and social transition. Progress in each of these areas is detailed in Annex 1. 44. In October 2007, the Government and the Bank jointly reviewed the portfolio of active and pipeline projects to ensure that they continued to be aligned to the priorities of the NDP. As a result of this review, all remaining IDA 14 funds were allocated into the operations prioritized by the Government. Eight new operations entered the portfolio during FY2008, resulting in an active portfolio of 11 projects for a total of US$273 million, of which approximately US$187.2 million were pending disbursement as of March 2009. Seven of these projects were conceived in the lending program agreed under the FY2007-2009 ISN. An additional project, the Emergency Recovery and Disaster Management Project, was incorporated later at the Government's request, to address the impacts of flooding caused by the natural disasters of El Niño and La Niña. The rest of the active operations were approved under the FY2004-2005 CAS. See Annex 2 (FY2007-2009 ISN Progress to date) and Annex 3 (World Bank Group Active Portfolio in Bolivia). 45. The lending operations supporting the Governance pillar were postponed due to delays in their preparation. These delays were due in part to frequent changes in the government counterparts and delays in the definition of the Government's strategy. The three lending projects designed to support the governance pillar (Job Creation and Competitiveness, Building Government M&E Systems--renamed as "Strengthening the National Planning System" under this ISN--and Strengthening State Efficiency and Transparency) were postponed. Resources were reallocated to projects in more advanced stages of preparation and the Strengthening State Efficiency and Transparency Project was converted into a Non Lending Technical Assistance aimed at supporting the government in defining a strategy in this area. 46. Portfolio quality considerably increased during FY2008--due in part to the closing of older projects--but delays in project effectiveness risk a reversal of the quality improvements in FY2009. The percentage of problem projects decreased from 40 percent in FY2007 to 8 percent in FY2008, while total commitments at risk decreased from 51 percent to 7 percent over the same period. The disbursement ratio slightly decreased from 14 percent to 12 percent, following effectiveness and implementation delays in the newly approved projects, explained in part by changes in the government's counterparts. The challenge remains the smooth implementation of projects under uncertain political and social conditions and in the 13 context of weak technical and institutional capacity and frequent turnover of government officials. 47. The lending portfolio was supported by core pieces of Economic and Sector Work. To provide the background for key policy discussions, taking advantage of the Bank's international experience, four pieces of Economic and Sector Work (ESW) were delivered to the Government over the last two years. Policies for Increasing Firms' Formality and Productivity assessed productivity constraints faced by Bolivian firms and provided policy recommendations to create the conditions to encourage their formalization. Reducing Gender- based Differences in Formality and Productivity complemented the previous report by providing policy recommendations to improve the conditions and productivity of women entrepreneurs in the informal sector. Strengthening Competitiveness for Export Diversification and Inclusive Growth evaluated trade policy and its effect on non-traditional exports. Two series of the Programmatic Social Protection Study provided a diagnostic on poverty and nutrition and a stock-taking of social programs. 48. The analytical work has contributed to generate debate by reaching key players in Bolivia and other development partners, and has also promoted informed decision making. There has been an important effort to widely disseminate the ESW. Several workshops have taken place to present and discuss the diagnosis and recommendations that arose from the studies. Some of the ESW leveraged financial support from other donors. It is too early to measure the impact of these studies, in terms of policy reforms implemented, since most of them were only recently disseminated. However, in the case of the social protection study, following extensive dialogue and policy analysis, the series provided concrete recommendations for operationalization of the Government's Social Protection and Integrated Community Development Strategy. The study contributed to the design of the cash transfer program to tackle chronic malnutrition in the most vulnerable rural municipalities. The program will be financed by the Investing in Children and Youth Project and complemented on the supply side by a Health APL III project, both recently approved. 49. Several other reports provided relevant information on key priority areas. An Operational Review of the Fondo Nacional de Inversión Productiva y Social (FPS) was delivered to the Government in FY2008. The Bank also provided training to Bolivian officials on the Public Expenditure and Financial Accountability (PEFA) methodology, which was partially used by the Ministry of the Economy and Public Finance to conduct a self-assessment of the country's public financial management systems. An ESW on Municipal Services and Finances is currently being prepared for delivery in FY2009. In addition, technical assistance on sector policies was provided to support the preparation of the National Basic Sanitation Plan through the Water and Sanitation Regional Program (WSP). This technical assistance included studies on (i) peri-urban small scale providers, (ii) sanitation, (iii) sanitation as employment and income generator, (iv) water quality monitoring evaluation, and (v) communication guidelines for community development. In addition, the WSP continues to publish the Magazine "Caudal" and is developing technical alternatives for sanitation with Sumaj Huasi and Emory University. 14 Box 1. Communications Strategy Outcomes In 2005, the Bolivia Country Office launched a new communications strategy, adapting itself to the new social and political environment. Acknowledging that the World Bank needed to be more transparent and accountable, 14 books resulting from the Bank's analytical work were translated and published in Spanish. Books were disseminated in 18 open events with large participation of Government officials, civil society organizations and academia. Several World Bank spokespeople have been interviewed in the media on development themes and Bank activities in Bolivia. An awareness campaign through newspapers reached 380,000 readers. The country office also produced local versions of the MDGs map, a brochure to dispel myths about the World Bank, and a comic prepared for children and teens. The Country Office offers library services for scholars and students in the most populated cities of Bolivia through partnership agreements with journalists associations in La Paz and the municipality of Santa Cruz. 50. The lending and AAA initiatives were complemented by an extensive program of grants. Trust Funds and Global Programs are an important element of the Bank's support to Bolivia. The Bank is currently administering four main grants amounting to US$8.1 million in support of institutional strengthening and project preparation and execution. These include: Global Partnership on Output Based Aid (US$5.2 million), Global Alliance for Improved Nutrition (GAIN) (US$2.6 million), Strengthening of the Deputies Chamber Finance Commission (US$0.2 million), and Strengthening Donor Aid Coordination (US$0.1 million). A complete list of all trust funds currently active in Bolivia is available in Annex 3.C. B. IFC Program 51. IFC's investment strategy in Bolivia has been based on the selective provision of financing for viable, high-impact projects in sectors such as infrastructure, hydrocarbons, financial markets and mining, as well as technical assistance and capacity building. As of end-FY2008, IFC's outstanding portfolio in Bolivia amounted to US$170.4 million in 14 projects (including US$64.6 million on behalf of participating banks). In terms of sectors, the greatest exposure is in hydrocarbons, information technology, and utilities. These projects supported more than 3,700 jobs and generated over US$116 million in government revenue in 2007. Financial institutions in IFC's portfolio provided for approximately 8,600 loans to small and medium-sized enterprises and more than 220,000 loans to micro- entrepreneurs. IFC has put considerable effort into identifying and pursuing several potential investments. However, due to the increasingly challenging environment for private sector investment, IFC has been able to commit only one project in FY2007-2009--US$30 million for the expansion of mobile telephone services in urban and rural areas. This investment is expected to provide an additional 600,000 phone connections, of which a significant part is in rural areas, and US$34 million in tax revenue to the Government. See Table 3 for a mapping of IFC activities to the ISN pillars, and Annex 3.B for a detailed list of the active IFC portfolio in Bolivia. 52. To complement the investment strategy, IFC has a four-pillar advisory strategy for Bolivia. The advisory strategy includes work on building a business enabling environment, creating sustainable value complexes, enhancing local benefits, and providing access to finance. 15 53. To build a business enabling environment, IFC launched in 2003 a pilot project to improve the business licensing process in La Paz. Given the pilot's success, the Government replicated the IFC project throughout the country with a "National Plan for the Simplification of Business Regulation at the Municipal Level." The project included the municipalities of Montero, Trinidad, Tarija, Sucre, Potosi, Oruro, Quillacollo and Yacuiba and has been yielding aggregate number of licenses issued of more than 3,100 between January and December 2008. The average number of days to comply with business regulation has been reduced from 66 days to between 3 and 7 days. 54. To create sustainable value complexes, IFC has identified the forestry industry as a strategic sector in Bolivia. IFC partnered with the World Wildlife Fund in a Wood Sector Supply Chain Improvement project to improve the capacity of indigenous communities in forest management and to integrate them into the value complexes of lead firms. In the first two years, the project increased sales and generated new jobs for the three participating communities. Business plans were developed for the beneficiary communities and residents were trained in sustainable forestry management, certification and business management. 55. The access to finance pillar has focused on developing the incipient financial leasing industry. IFC supported the submission of a new piece of legislation to Congress, based on international best practices and adjusted to the local context. This program is winding down as receptivity has been limited and progress slow. IFC has also worked to strengthen credit bureaus and information sharing practices, increasing mobile banking penetration, supporting micro, small and medium enterprises (MSME), supporting access to capital markets, and exploring remittance based-services. 56. The enhancing local benefits (ELB) pillar supported a partnership between Transierra, a private gas transport company and IFC client, and Guarani authorities. The goal was to enhance the commercial viability of four adjacent indigenous projects, thus improving incomes and opportunities for the Guarani communities. The projects' capital requirements are met through the Indigenous Development Plan's Support Program (PA-PDI), through which Transierra committed US$9 million for community development for the next 20 years. A total of 2,410 families of 67 Guarani communities in Bolivia are expected to benefit from the program. C. Multilateral Investment Guarantee Agency (MIGA) Program 57. The MIGA Program in Bolivia is limited to one guarantee. Currently, MIGA has one operation in Bolivia: in 2006, the agency issued a US$14.25 million guarantee to Banco de Crédito del Peru, covering its US$15 million shareholder loan to Banco de Crédito de Bolivia. The guarantee is for six years and protects against the risks of transfer restriction and expropriation. VI. DONOR ASSISTANCE AND COORDINATION 58. Although decreasing as a percentage of GDP, official development aid to Bolivia remains a key contributor to the country's development efforts. Bolivia's primary partners are the Andean Development Corporation (CAF), the Inter-American Development Bank 16 (IADB), Japan, United States Agency for International Development (USAID), the World Bank, and the European Union. Spain, the Netherlands, Denmark, Sweden and Germany also play active roles. Annex 4 shows the evolution of each donor allocation to Bolivia since the previous ISN. 59. The international community has been working to align its support around the main objectives of the National Development Plan. The formal coordination mechanism with the Government is the "Mesas de Coordination." Since late 2006, the Government has organized five Mesas to discuss sector plans and the NDP implementation: 1) Bolivia Productiva (productive sector); 2) Bolivia Digna (social sector, especially the MDGs); 3) Bolivia Democrática (democracy and participation); 4) Macroeconomic Issues; and 5) Harmonization. The World Bank actively participates in all five efforts. The Bank is co- leading the Mesa Bolivia Digna along with the Netherlands. 60. In late 2007, several meetings took place wherein Government agencies presented their sector plans and requested feedback and financing to implement them. Donor agencies have been defining their assistance strategies and specific programs under the guidance of the Ministry of Development Planning. In addition to the Mesas de Coordinación, a "Bolivian Partner Group" (Grupo de Socios de Bolivia, GRUS) was created in late 2006. The GRUS is an institutionalized coordination mechanism among donor agencies and a platform to support the NDP's implementation. All of the multilateral agencies and most of the bilateral ones are members of the GRUS. Additionally, as a United Nations System member, the Bank has strengthened in 2008 its participation in the UN Country Team in order to promote harmonization and seek synergies to improve the work of the entire system in the field. 61. There is strong interest in pushing forward the implementation of the Paris Declaration on Aid Effectiveness, and the Bank is assuming a greater role in donor coordination. The European Union Code of Conduct on complementarities and division of labor adopted in 2007 will be applied under the GRUS context. There is opportunity for a harmonized approach in the design and implementation of projects addressing service delivery to the poor and the strengthening of fiduciary systems and procedures. The Bank is assuming a greater role in donor coordination and has been very active in all GRUS sub-groups. Since the beginning of 2009, the Bank is the co-chair of the GRUS, together with the Netherlands and Denmark, and will be chairing the group as of July 2009. 62. Although there is still a long way to reach effective donor coordination, several areas are already showing concrete results. Specifically, Switzerland and Denmark are co- financing the recently approved Second Rural Participatory Investment Project (contributing US$4.5 million and US$11 million, respectively). The project had only one project assessment document and a single operational plan, and is managed by a donor committee that approves its yearly budget and operational plan. Several analytical studies are being coordinated with and supported by other donors; including the studies on climate change and the PEFA, among others. 17 VII. LESSONS LEARNED 63. The 2005 Country Assistance Evaluation (CAE) assessed the relevance, efficacy and efficiency of the Bank's assistance to Bolivia during the period FY1999-2004, one of the more difficult periods in the country's history. While the ratings of projects during this period were generally in line with those across the Bank, they did not, according to the report, translate into satisfactory development impacts--likely due to external factors. The report emphasizes the importance of frequent and realistic assessments of risk--political, social, and macroeconomic--and of implementation realities. Among the report's recommendations-- made in 2004 in a context of high political uncertainty--were the adoption of a strategy with a short time horizon, emphasis on public sector financial management, and provision of AAA on the critical social and political issues facing the country. The evaluation is being carefully analyzed so as to be taken into account during the implementation of the current proposed Strategy. 64. Several key lessons of the past, including those learned during the implementation of the recently expired ISN, can be applied to the new Assistance Strategy in Bolivia: Rapid engagement with the incoming Administration proved to be successful. The World Bank was the first major donor to engage with the Administration of President Morales. This rapid engagement helped clear up negative perceptions of the Bank and other multilaterals, and contributed to the development of a trusting environment to build a positive relationship with the new authorities. Identification of shared objectives and priorities is critical. The World Bank invested considerable effort in the identification of shared objectives and priorities with President Morales' Administration, while maintaining a long-term strategic horizon. This allowed for the timely commitment of the entire IDA 14 allocation to Bolivia under the previous ISN. The delays to make significant advances in the FY2007-2009 Governance pillar show that the Bank strategy needs to be more focused. The new ISN will therefore be more selective in this pillar, by targeting areas where progress can be made and measured, and making use of more practical instruments of engagement where there is common ground with the Government. Pragmatism and flexibility proved necessary to work with low capacity in Government teams. Even though shared priorities were identified, differences in methodologies and frequent changes in operational priorities and key staff slowed down the implementation of the strategy. The role of the Bank as a source of knowledge and the proactive engagement of World Bank teams were critical to advance project preparation and implementation. Moving forward, the Bank should: (i) continue the focus on shared priorities; (ii) consider additional support to Government teams in project preparation and implementation; (iii) avoid project atomization, and focus on a limited number of simple projects, with clear, well defined measurable objectives, and realistic implementation timeframes; and (iv) continue working to sustain the Bank's long-term engagement in the country. 18 VIII. PROPOSED WORLD BANK GROUP PROGRAM A. Indicative IDA Envelope and IBRD Involvement 65. The overall size of the IDA envelope during the ISN period is expected to be approximately US$137 million4. This includes approximately US$26 million of remaining financing from FY20095, and indicative amounts of IDA financing of about US$111 million for the FY2010-FY2011 period6. In addition, IDA debt relief provides a notional equivalent of US$40 million per year in budget support for the next 35 years. Although the amounts involved are modest, considering the resources currently available to the Bolivian Government from other sources, the World Bank support comes with extensive global and regional experience and access to a wide range of solution packages. 66. Despite being a blend country, Bolivia will only access IDA resources during the period covered by the new Strategy. Bolivia's creditworthiness for IBRD loans is expected to be reconsidered as appropriate in due course. This would allow time for clarification of the political environment and the country's medium and long-term economic prospects. Under the current scenario, the Bank's interventions in Bolivia would be limited to investment lending. However, should the global economic deterioration impact Bolivia in a significant way, the Bank would work closely with the IADB, IMF, and other partners to develop a crisis response, including the option of front-loading our lending and non-lending technical assistance program. B. Strategic Priorities 67. The strategy continues to be one of selectivity and flexibility. Following the lessons learned and the CAE recommendations, the Government and the Bank agreed that the new Strategy should identify fewer lending operations with larger amounts of financing to optimize the development impact of the projects and achieve economies of scale. There is also agreement that implementation of previously approved projects should be a priority in the coming years. The interventions take into account complementarities with other donors, and focus on a medium-term engagement horizon. 68. The proposed ISN will provide a framework covering the remainder of IDA 15 (2010-2011) and will support the country's efforts to significantly reduce extreme poverty. The Government is designing a medium-term Extreme Poverty Eradication Program, which will include far-reaching, gradual interventions in all municipalities. The World Bank and other donors are actively supporting the program's preparation by providing knowledge and examples from international experiences relevant to the Bolivian context. 4Using an exchange rate of US$1.5 per SDR 5The ISN covers the last two years of the IDA15 period. US$30 million of the total IDA15 allocation was already committed in FY2009 to the Additional Financing of the Rural Alliances Project 6This envelope is fixed in SDR terms for FY2009 and indicative thereafter. Actual allocations in these years will depend on: (i) total IDA resources available, (ii) the country's performance rating; (iii) the performance and assistance terms of other IDA borrowers; and (v) the number of IDA-eligible countries. 19 69. Based on the Bank's comparative advantages, the Government requested that the WBG support focus on four pillars that consolidate the progress accomplished during the implementation of the previous strategy. In addition to the three pillars supported by the previous ISN--which focused on good governance, job creation through growth, and improved public service provision--the proposed ISN includes an additional pillar that focuses on sustainable development, in particular managing the economic impacts of climate change. 70. The Government's stated four pillars are: (1) Productive development and support to production in both rural and urban areas and in ways that maximize benefits to the poor and promote food security (former job creation through growth pillar). (2) Sustainable Development to mitigate the effects of natural disasters and of productive activities with damaging environmental consequences; (3) Human Development to enhance the Social Protection Network and ensure equitable access to higher quality education and public health services as well as to cope with the negative effects of unemployment (former Improved public service provision pillar). This pillar consolidates the advances of the former; and (4) Governance and support to public sector (former good governance pillar) to promote values, principles and technical tools to enhance public services efficiency. Pillar I: Productive Development and Support to Production: The main objectives of this pillar are to increase agricultural productivity and food security, boost productivity and job creation, and improve delivery and access to services in both urban and rural areas. 71. The Government is faced with several challenges as it seeks to support productive activities. A major challenge­already identified in the FY2007-2009 ISN­is how to reconcile the need to maintain the role of the private sector and market-driven mechanisms with the Government's intention to increase the role of the State in the economy. Reliance on State- owned entities to carry out activities in sectors such as rural development, extractive industries, and public-service provision has revealed a need to address capacity and efficiency issues. Additionally, in the context of the constitutional reform, it is important to clarify the roles and responsibilities of the different levels of Government and to enhance coordination to maximize the benefits of public investment. 72. Productive activities will be supported by existing and new operations in rural areas--where the largest share of extreme poor live--with a focus on increasing agricultural productivity and food security. The current portfolio of projects supporting this strategic area include: (i) the Rural Alliances Project that supports agriculture production for domestic market consumption by strengthening the access of small producers to markets in 64 municipalities; (ii) the Participatory Rural Investment Project II designed to support productive infrastructure and management capacity in poor regions and (iii) the Land for Agricultural Development Project that promotes decentralized market-based mechanisms to allow poor farmers to acquire suitable agricultural lands and to carry out productive investments. Four additional agriculture and rural development projects are being prepared: (i) an Additional Financing for the Rural Alliances Project that will benefit 29 additional municipalities, approved by the Board on April 7, 2009; (ii) an Agriculture Services project designed to strengthen agricultural research and extension and to promote agriculture insurance for poor farmers; (iii) a rural roads project designed to improve the rural road network to support 20 productive activities; and (vi) a Community Driven Development project (CDD) designed to promote food security for poor communities. These operations emphasize capacity building and institutional strengthening and include competitive mechanisms to allocate project funds to provide efficiency incentives to all public and private stakeholders. 73. The new operations will be grounded in the results of several analytical efforts currently underway. Specifically, the ongoing agriculture Public Expenditure Review aims at providing the analytical grounding to lending operations such as the Agricultural Services and the CDD for Food Security project. 74. The Productivity and Job Creation project to boost productivity and employment in urban areas is still under discussion with the Minister of Productive Development and Plural Economy. The project objective would be to boost the development of labor-intensive micro, small and medium enterprises in urban areas, facilitating their business environment, creating incentives for vertical and horizontal productive links, and improving their access to training, technology, financing and markets­including exporting markets. The design of this project is being coordinated with the IFC. 75. Support to production and extreme poverty eradication will also be enhanced by operations designed to broaden the provision of basic services. Ongoing projects include: (i) the Decentralized Infrastructure for Rural Transformation Project that seeks to increase electricity access through grid densification and off-grid service provision; (ii) the Road Rehabilitation and Maintenance project that supports rehabilitation of key segments of the primary and secondary road system and strengthening of capacity to manage road assets; (iii) the Urban Infrastructure for the Poor Project that promotes urban upgrading, municipal transport and sanitation in La Paz, El Alto and Santa Cruz respectively; and (iv) the Lake Titicaca project that supports infrastructure improvements, in particular in sanitation, designed to increase the environmental and social sustainability of economic activities for those living around the lake. Building on the achievements and lessons learned from these projects, the prospect for additional operations is currently being evaluated in the fields of (i) rural electricity, (ii) rural roads, and (iii) urban services. As in the area of rural development, the operations promoting the provision of basic services emphasize capacity and institution building together with competitive processes designed to enhance efficiency. 76. The expected outcomes after the implementation of the operations supporting this pillar include: (i) improved economic inclusion of the rural population in a framework of social and cultural equity; and (ii) increased standards of living in poor urban areas through better access to basic services. Pillar II: Sustainable Development: The main objectives of this pillar are to mitigate the effects of natural disasters, and of productive activities with damaging environmental consequences; increase the knowledge of the impacts of climate change; and improve the capacity of public authorities to formulate and implement adequate climate change responses. 77. The Government has requested support from the Bank to mitigate the effects of natural disasters and of productive activities with damaging environmental consequences. Since the year 2000, a notable increase in climate-related disaster situations has 21 been observed in Bolivia, some of them associated with El Niño/La Niña events. Recent natural disasters--such as El Niño-2007 and La Niña 2008--have hit Bolivia severely. The Government recognizes the seriousness of the challenge and is taking steps to address it, and has formulated a National Plan of Reconstruction and Rehabilitation (PNRR). In addition, the Government requested the Bank to support its efforts in confronting the effects of global warming, in particular adaptation to climate change. The Bank is keen to support Bolivia in this area and has been coordinating with other donors to provide financial and technical assistance to develop a comprehensive program on climate change adaptation. The objective is to address the double challenge of: (i) increasing understanding and knowledge of the impacts of climate change; and (ii) improving the capacity of public authorities to formulate and implement adequate climate change responses. 78. Several efforts are currently underway, financed by different global trust funds: (i) the Bank is administering a US$5.2 million Trust Fund from the Global Partnership on Output Based Aid (GPOBA) that aims to increase affordable access to electricity in remote rural areas by providing output-based subsidies for the installation of solar panels, thus helping the country develop renewable energy resources; (ii) a US$8.9 million Global Environmental Facility Grant (GEF) operation for the Andean Region on adaptation to the impact of rapid glacier retreat in the tropical Andes; and (iii) a US$2 million operation on methane capture and basic sanitation with Santa Cruz's water utility service. In addition the Bank has two GFDRR supported projects that focus on disaster mitigation: (i) Mainstreaming Adaptive River Defense for Huayhuasi and El Palomar Settlements (US$0.43 million); and (ii) Technical Assistance Support for Strengthening of Bolivia's Disaster Risk Reduction Framework (US$0.36 million). These projects have been designed to enable ex-ante disaster risk reduction in Bolivia. 79. Additionally, several studies and technical assistance activities on climate change are currently under preparation. These include: (i) a Readiness Plan Idea Note for the Forest Carbon Partnership Facility; (ii) a consultation on the Bank's formulation of the strategic framework on climate change, (iii) technical assistance for water-related adaptation to climate change and variability; (iv) a study on the Economic Impacts of Climate Change; (v) an Emergency Recovery and Vulnerability Reduction Technical Assistance to support disaster risk mitigation; and (v) Bolivia's participation in the Pilot Program for Climate Resilience (PPCR). Approaches to adaptation to climate change in agriculture, some of which are currently being developed in neighboring countries, may also be applied to future investment operations on climate change in the productive sector in Bolivia. 80. The expected outcomes after the implementation of the operations supporting this pillar include: (i) increased standards of living in areas previously affected by disasters; (ii) increased Government capacity to respond to future natural disasters; and (iii) increased resilience of climate investments in a number of territories. Pillar III: Human Development: The main objectives of this pillar are to ensure equitable access to better quality of education and public health services; enhance the social protection network; and provide the youth and vulnerable households with the means to reduce the risks and cope with the negative effects of unemployment. 22 81. Despite the progress and ongoing efforts in the social sectors described in Annex I, significant challenges remain in the area of human development. The decline in poverty over the 1999-2006 period has been modest and inequality has stagnated--remaining one of the highest in the region. While the incidence of poverty remains greatest and deepest in rural areas, the number of urban poor (2.9 million) now exceeds that of the rural poor (2.7 million). The indigenous populations are disproportionally affected, especially in rural areas, and the urban poor are more likely to be young people and adults of working age, while the rural poor are more likely to be young children and the elderly. The young urban poor are exposed to specific new risks, including child labor, school dropouts--especially at the secondary level-- unemployment, gangs, and drug abuse. This calls for differentiated strategies for urban and rural areas as currently proposed in the Government's National Development Plan. 82. Recent improvements in health and education indicators have not been sufficient, and significant challenges remain that require urgent attention. Children under five in Bolivia suffer some of the highest chronic malnutrition rates in the region, and a significant portion of the population lacks access to prenatal and child health care, especially in rural areas and among the poor. The extension of coverage and the improvement of quality of education services also remain a challenge, mainly in the pre-primary and secondary levels. Important education initiatives have been implemented at the national level, including the literacy program Yo Si Puedo, and the Bono Juancito Pinto cash transfer for primary students, which have shown significant results in increased school attendance, particularly in primary education. However, the passing of the Government's proposed new education law is still pending. 83. Several lending and non-lending operations in the areas of social protection and education are being discussed with the Government with the objective of consolidating the progress of the recent years. A second phase to the existing social protection investment operation (Investing in Children and Youth) is expected for FY2010 to: (i) support the scope increase for the conditional cash transfer tied to family human capital investments and the youth skills development programs within the framework of the new Extreme Poverty Eradication Program, and/or (ii) support the social protection strategy in urban areas (through the Comunidades Recíprocas Program). This will be complemented by non-lending technical assistance (NLTA) to support the social protection component of the Extreme Poverty Eradication Program. The Bank has also begun discussions with the Ministry of Education to provide NLTA support for, among other things, deepening the role of sub-national governments in the provision of education services in the prevailing decentralization context. In addition, the ongoing "Strengthening access to employment for low income families" regional study is looking at policy options to strengthen urban markets for skills formation and employment of low income families, in order to inform the Government's efforts to strengthen education, training, and labor markets in the country. Potential additional financing operations for the Secondary Education Transformation and the Investing in Children and Youth Project are also under discussion. 84. The Government is interested in a multidimensional measure of welfare to monitor the "Vivir Bien" strategic objective of the NDP. The goal is to promote a comprehensive concept of welfare development that includes not only reducing monetary 23 poverty, but also poverty in terms of access to health, education and other goods and services that are considered fundamental for the pursuit of happiness. The World Bank team is providing analytical work, such as measures of equality of opportunities and multidimensional poverty, to help both the diagnosis and targeting of the population that fails to reach minimum standards of multidimensional welfare. 85. The expected outcomes after the implementation of the operations supporting this pillar include: (i) increased promotion rate in secondary education for the target population; (ii) reduction of chronic malnutrition among children younger than 2 years of age, and of the critical maternal health risk factors in the targeted rural areas; and (iii) increased percentage of low-income youth living in urban and peri-urban areas with regular employment and improved labor incomes. Pillar IV: Governance and Support to Public Sector: The main objectives of this pillar are to improve the design, monitoring and evaluation of public programs for an effective implementation of the NDP; strengthen public sector management for better services delivery and increased inclusion; and strengthen the PFM and procurement framework to improve transparency and accountability. 86. Governance challenges continue to be central to Bolivia's broader development agenda, as reflected in past strategies. The Bank provided assistance and supported reforms to promote good governance since the late 1990s, with significant advances in several areas. The main areas of support included financial management, civil service reform, strengthening of key agencies such as customs and tax administration, and fostering fiscal discipline for decentralization. These efforts were complemented by analytical work on decentralization, state reform strategies, and access to justice. The Bank also supported policy dialogue during the constitutional reform process through an IDF. 87. Although it was not anticipated in the FY2007-2009 ISN, Bolivia participated in the World Bank's 2007 global consultation on "Strengthening World Bank Group Engagement on Governance and Anticorruption." Bolivia sent representatives from congress, the administration, the judiciary, civil society, media and the private sector to this event. Through this process, the Government reiterated its strong commitment to fighting corruption and increasing transparency in the use of public resources; a mandate that has been assigned to the Ministry of Institutional Transparency and Fight against Corruption in the Ministry of Justice. Critical finding from those consultations included the importance of donor harmonization in the improvement of governance, and calls for continued World Bank engagement in the Government & Anticorruption (GAC) agenda. 88. However, significant challenges remain, including access to services, accountability, and institutional capacity, in a new context of deeper decentralization. Bolivia faces three critical governance challenges: (i) Inequities and limited access to services. Public revenues are unequally distributed across departments and municipalities, partly due to the imbalanced distribution of transfers from hydrocarbon revenues. In addition, unequal access to services by citizens of different social backgrounds or geographical location continues to severely limit inclusion; (ii) Weak accountability, both vertically (within the 24 administration) and horizontally (vis-à-vis the citizens). The decentralization process has led to a blurring of roles and responsibilities in the provision of public services in many sectors such as health, education, and roads; (iii) Limited institutional capacity. The public sector has weak capacity to establish priorities, design, coordinate, and implement programs and public services due in part to limited monitoring and evaluations systems, high staff turn-over, low public salaries, and a process to hire public servants that is not entirely merit-based. 89. Lessons from the last ISN include the difficulty to make significant advances in key areas and the need for the Bank strategy to be more focused. The new ISN will be more selective by targeting areas where progress can be made and measured, using more practical instruments of engagement where there is common ground with the Government. As a result, the program considered under the previous ISN, has been redirected from lending to non lending activities, which will help identify areas of support in which the Bank has a comparative advantage. Building on the analytical work, targeted lending operations can be designed only when there are clear institutional champions, thereby increasing the probability of successful implementation. 90. The Government has requested support from the Bank to improve its public investment programs, particularly those targeting the new poverty eradication plan. The Bank is eager to support Bolivia on this front by providing needed technical advice. Two main interventions will be supporting the Government in the area of Governance and Support to the Public Sector: (i) a non-lending technical assistance on governance to improve the public investment process and the coordination among different levels of Government; and (ii) an operation to enhance the Government's monitoring and evaluation system (Strengthening the National Planning System Project). The main objective of this operation is to strengthen the Government's capacity to monitor and evaluate public expenditure. It will assist both the Ministry of Development Planning and the National Statistics Institute (INE) in building the legal and institutional framework required to improve public service provision in a more decentralized context. In addition, the implementation of the Institutional Development Trust fund assisting the Congress in its efforts to improve and further institutionalize the budget process vis-à-vis the Executive Power as well as initiate the monitoring of public expenditures will further improve the use of public resources7. Other areas under discussion in Bolivia include consensus building for a new decentralization arrangement and departmental autonomy, and the possibility of establishing a so-called "fiscal pact"8--key elements for improved governance. 91. The Government has expressed its commitment to continue working on strengthening the Public Financial Management (PFM) systems. At the end of 2007, the 7The main objective of the grant is to strengthen the House of Deputies' Budget Committee for more effective conflict resolution and dissemination of public information to citizens, particularly in areas related with budget processes and public expenditure. Among other things, the grant supports the Congress in creating a Center for Research and Information. 8Fiscal Pact is defined as a set of mechanisms to be applied to all levels of (autonomous) governments and aiming to maintain the long-term fiscal equilibrium of each local and regional government as well as the fiscal equilibrium of the whole public sector. 25 Government carried out a self-assessment of PFM performance (Evaluación de las Finanzas Públicas ­EFIP), which was updated in 2008 using the PEFA methodology. Based on the results of this initial exercise, the Ministry of Economy and Public Finance has prepared, and is in the process of implementing a plan with the following strategic objectives: (i) revamp the existing information technology to provide accurate and up to date information to guide decision making; (ii) consolidate fiscal policy to improve the quality of expenditure and optimize the use of public income; (iii) promote the active participation of the Ministry of Economy and Public Finance in the new fiscal structure resulting from the autonomic process; and (iv) update the regulatory framework for PFM in accordance with the new state structure and social demand. 92. There is on-going dialogue with the Ministry of Economy and Public Finance to update the EFIP in 2009, following the PEFA methodology. A formal request to the Bank for support in this area was recently received. These efforts will be supported jointly by the WBG, the IADB and other Bilateral Donors. The updated assessment will provide the basis for the Government to prioritize and measure progress, and identify critical areas where reforms might be needed. A comprehensive assessment and the subsequent design and implementation of an action plan will also provide the opportunity to move forward the implementation of the Paris Declaration by gradually moving towards the reliance on Country Systems. 93. The Bank is also working closely with the Government to determine specific measures to improve monitoring and evaluation and prevent corruption in Bank- financed projects. The fight against corruption continues to be key to the Government's development plan, where zero tolerance for corruption and impunity is mentioned. The Bank is discussing with the Government preventive measures in Bank financed projects, including a potential expansion of prior and post review of contracts, and periodic training sessions on fiduciary policies. 94. The expected outcomes after the implementation of the operations supporting this pillar include: (i) improved performance information on public programs to allow tracking of progress in key programs; (ii) alignment of sector plans to the NDP; (iii) increased coordination among sector ministries at all levels of Government in planning, funding and execution of public spending in the targeted areas and agencies; (iv) improved PFM and procurements systems to simplify and expedite the preparation and implementation of projects at the national and sub-national levels; and (v) updated regulatory framework for PFM in accordance with the new decentralized structure. Box 2. Public Financial Management Status The results of the 2004 Country Financial Accountability Assessment (CFAA), together with other related advisory work, concluded that Bolivia still faces several challenges in Public Financial Management (PFM). Those issues were related to budget formulation--including a functional classification of expenditures-- developing a multi-year budget planning, strengthening internal and external control and audit functions, reducing treasury arrears, and improving reporting on budget execution. On the basis of the CFAA findings, the Bolivian Government presented in 2005 the "Strategic Framework for Strengthening Public Finances," which was fully endorsed by the Donor Community through the former Multi-Donor Budgetary Support Group. Progress in the implementation of the strategy was uneven, partly because of frequent changes in Government 26 administration. However, key actions were completed by the Ministry of the Economy and Public Finance, including: the expansion of the system for budget control and monitoring (SIGMA for its acronym in Spanish), both at the central, and sub-national levels (SIGMA coverage reaches 88 percent of the total expenditure); and the implementation of a functional classification of expenditures and the implementation of the Single Treasury Account (CUT), including the CUT in US dollars, which continues to contribute to the efficiency and transparency of payments. C. IDA Program 95. The new tentative lending and non-lending activities discussed with the Government to support the four pillars are organized into a two-year program that includes the recently approved operations. This program amounts to about US$90 million in new operations (plus US$30 million in additional financing approved on April 7, 2009 for the Rural Alliances Project) and US$223 million pending disbursements from the active portfolio. In addition, US$47 million of the remaining IDA 15 allocation will be available for flexible use, to provide the required agility to respond to additional needs that may arise after the electoral process, and to support the Government's efforts to stem the impact of the global crisis. Given that the portfolio of ongoing operations is fairly young and covers many of the pillars supported by the new strategy, the focus will be to support and expand the implementation of the existing operations, to consolidate results in those areas, and to limit the number of new operations. Depending on their performance, the Government might consider a request for additional financing in FY2010 for four projects that are currently under implementation: Urban Infrastructure for the Poor, Decentralized Infrastructure for Rural Transformation, Secondary Education Transformation in La Paz, and as part of the anti-crisis response, the expansion of the Social Protection Project. Table 3. Relevance of Ongoing Portfolio to the new ISN Pillars Pillar I: Productive development and support to production Road Rehabilitation and Maintenance (US$77 MM) Decentralized Infrastructure for Rural Transformation (US$20 MM) Rural Alliances (US$28.4 MM + US$30 MM in Additional Financing) Urban Infrastructure for the Poor (US$30 MM) Land for Agricultural Development (US$15 MM) Lake Titicaca Local Sustainable Development (US$20 MM) Participatory Rural Investment II (US$20 MM) IFC's Banking Sector Operations (BISA, Banco Los Andes, Banco Sol, Banco Mercantil) IFC's Advisory Services on leasing IFC's Infrastructure Operations (CBTI, Central Aguirre, TDE, TRECO, Telecel, Transierra) Pillar II: Sustainable Development Emergency Recovery and Disaster Management (US$16.9 MM) IFC's Sustainable Advisory Services ­ Forestry Sector, Transierra Pillar III: Human Development Secondary Education Transformation (US$10 MM) Expanding Access to Reduce Health Inequalities (US$18.5 MM) Investing in Children and Youth (US$17 MM) Pillar IV: Governance and support to public sector No active IDA projects for this pillar IFC's BEE Advisory Services, Municipal Simplification and Municipal Scorecard 27 96. The Bank will also provide selective non-lending technical assistance (NLTA) and Economic and Sector Work in key areas where technical weaknesses have been identified by the Government. The NLTA will cover: (i) social protection, focusing on implementation of social programs; (ii) public sector governance, focusing on the public investment process and the coordination among different Government levels; (iii) education quality, focusing on the organization of education systems in a decentralized context, particularly in the measurement and policies needed to improve quality; and (iv) poverty, focusing on its multidimensional aspects. In addition, the Bank will provide support through Economic and Sector Work, including studies on food inflation, municipal services, labor markets, a Poverty Assessment, a Country Economic Memorandum (CEM), and a Financial Sector Review9. A proposal to implement a FIRST Program to strengthen the Superintendence of Bank is also being discussed. These activities will contribute to the overall national development plan and will support future Bank lending activities. Table 4. Tentative IDA Lending and Analytical Program FY Operations Strategic Area FY2010 Lending Agricultural Services Productive Development Strengthening the National Planning System Governance & Public Sector Rural Roads Productive Development AAA Municipal Services Productive Development PEFA (ESW) Governance and Public Sector OECD-DAC Procurement (ESW) Governance and Public Sector Education (NLTA) Human Development PER on Agriculture (ESW) Productive Dev/Governance Economic & Social Impacts of Climate Change (ESW) Sustainable Development Multi-dimensional Poverty (NLTA) Productive/Human D/Governance Rising Food Prices in Bolivia (ESW) Productive D./Human D. Social Protection IV (NLTA) Human Development Crisis Policy Notes (ESW) All Strategic Areas PS Governance I (NLTA) Governance and Public Sector Gas Study (NLTA) Productive Development Strengthening Access to Employment for low income Human Development families (NLTA) FY2011 Lending Social Protection II to support the PEEP Human Development CDD Productive D./Human D. AAA Financial Sector Review (ESW) Productive/Sustainable/Human D CEM (ESW) Productive/Human D 9A significant component of Bolivia's Financial Sector are the microfinance institutions, which serve the lower income segment of the population and micro-business, and account for 17% of cumulative deposits in Banks and regulated MFIs (1,275 million accounts) and for 31% of the cumulative loan portfolio (770,000 loans). The Superintendence of Banks has recently taken important steps for the consolidation of the sector, which will allow the extension of the formal financial system to remote and poor communities. 28 FY Operations Strategic Area Poverty Assessment (ESW) Productive/Sustainable/Human D PS Governance II (NLTA) Governance and Public Sector D Education Review (ESW) Human Development Social Protection V (NLTA) Human Development 97. In addition, the Water and Sanitation Regional Program (WSP) will scale up global and regional/local learning processes and will support public polices to promote safe and reliable water and sanitation services, focusing on the poor and on decreasing the sanitation gap. The activities for FY2009-2012 include: (i) a National Conference "BOLIVIASAN"--part of the International Year of Sanitation--to promote sanitation; (ii) a Hand Washing with Soap Initiative; (iii) support for innovative sanitation alternatives, through a US$2 million Trust Fund, which is being negotiated with the Canadian International Development Agency (CIDA); and (iv) peri-urban sanitation sustainable alternatives financed by the Swedish Agency for International Development (ASDI) through a 3 million Swedish Krona (SEK) Trust Fund. 98. The Bank will continue to support institutional strengthening to address fiduciary weaknesses. The Bank will work with the Government to identify the areas that affect the implementation of the entire lending program, such as capacity in procurement and financial management. The ongoing support to improve governance in procurement should be sustained, by: (i) strengthening procurement management at the central, departmental and municipal levels; (ii) supporting the development and implementation of key performance indicators for the road-construction market; (iii) designing mechanisms to monitor inflation of construction prices; (iv) promoting transparency and competitiveness; (v) strengthening Government and private-sector integrity and ethical values; (vi) providing training and development programs to ensure that relevant skills are in place for an effective project implementation; (vii) supporting the preparation of a construction market research study; (viii) developing principles and procedures to simplify procurement procedures; and (ix) supporting the evaluation of the entire procurement system based on the Organization for Economic Co-operation and Development ­ Development Assistance Committee (OECD-DAC) methodology. D. IFC Activities 99. The new ISN will continue to be a joint effort with the IFC. An IFC mission traveled to Bolivia in early December 2008 to examine IFC-IDA cooperation in the country and elaborate a joint strategy. 100. The strategy will continue to promote sustainable private sector investment in Bolivia. Due to the increasing role of the state in strategic sectors and the global economic crisis, IFC intends to seek investment opportunities in a selective way. The engagement will be in investment operations where: (i) current economic policies may not constitute a threat to private sector development, and (ii) critical changes of the regulatory framework are not expected. 101. In this context, IFC will continue supporting the financial sector to broaden access to finance to Small and Medium Enterprises (SMEs) and achieve high development 29 impact. IFC will work with financial and Microfinance Institutions (MFIs) to extend their outreach to SMEs and respond to unmet demand. The focus will be on supporting SME banking and commercially viable microfinance institutions. IFC will continue to look for opportunities to support MFIs through the provision of liquidity and trade finance. 102. Working in close collaboration with other multilateral organizations, IFC will selectively identify investment opportunities in non-traditional productive sectors with high potential of economic growth and employment generation. Efforts will concentrate on the agribusiness and forestry sectors. With other multilateral organizations, IFC will identify joint-investment opportunities, ensure sustainability, and broaden development impact. Strategic alliances with key multilateral agencies will take place whenever possible to leverage financing and expertise to support private sector development. 103. Regarding Advisory Services Operations, IFC will remain actively engaged in four pillars: (i) business enabling environment; (ii) corporate advice; (iii) enhancing local benefits; and (iv) access to finance. Advisory Services will support the overarching ISN Program of Productive Development and Support to Production and, on the margin, the Governance and Support to Public Sector Pillar. 104. The business enabling environment strategy will focus on the implementation of construction permit products at the municipal level, including the simplification of construction permit-related inspections. These products are fully compatible with the Bolivian Government's NDP: reducing bureaucracy and improving government transparency via process and technology improvements to enhance the business environment of economic activities. Other possible projects at the sub-national and national level might develop in environmental and wood-related licensing as well as in trade logistics­which might be designed in cooperation with the World Bank. 105. Access to finance will support the transformation of MFIs into banks, institutional capacity building, new product development and selected regional expansions of MFIs. Under the MSME Program, the team will seek to work closely with qualifying banks interested in moving down market to better serve the MSME segments. Areas such as housing finance and sustainable finance are not contemplated due to the lack of clear opportunities for intervention, yet might be part of a joint effort with the World Bank. The projects are expected to be executed at the institutional rather than at the sector level. 106. The ELB strategy will seek to provide revenue management capacity building of governments at regional and municipal level related to oil, gas and mining industry operations. Assuming the Central and Regional Governments are receptive, and provided that the regulatory framework regarding property rights is sufficiently clear, the ELB strategy will be closely tied to existing and potential investment opportunities on extractive industries, prioritizing regions of high poverty indices such as Potosí and Oruro for mining, and the Chaco region for hydrocarbons. In this context, IFC will work to build and strengthen partnership ties with key donor agencies supporting the extractive industries' development agenda (such as CIDA and Norway), in order to leverage financing and expertise on accruing benefits to local communities. 30 107. The corporate advice (CA) strategy promotes SME development by providing advisory services to strengthen linkages in selected supply complexes, improving compliance with standards, fostering productivity increases in pre-selected leading firms and seeking opportunities to improve business skills through managerial training. The CA strategy will be tied to existing and potential investment projects in the agribusiness and forestry sectors, considered key due to their income and employment generation potential among primary producers. In accordance to IFC's climate change initiative, IFC could promote sustainable practices and clean production technologies in the agribusiness and forestry industries. Additionally, IFC will seek to partner with suitable stakeholders for the deployment of Business Edge--a managerial training toolkit adapted to local conditions, aimed at enhancing business management skills among local SMEs. IX. RESULTS FRAMEWORK 108. Building on the progress from the previous ISN, the Government and the Bank have designed a simplified results framework for the proposed ISN. This framework differs from those found in a traditional CAS in that 8 of the projects approved in FY08 have recently started (or are yet to start) their implementation, and several of the tentative interventions will start their implementation only upon the completion of the proposed ISN. Thus, the outcomes of most of them are expected to materialize much later than the FY2010- 2011 timeframe. In this context, the outcomes identified refer to the results expected upon or beyond the closing of the projects, while the milestones are expected to show some progress during the ISN implementation. The detailed framework is included in Annex 5. X. RISKS AND RISK MITIGATION 109. Political risks are related to the difficulty of the Government and regional opposition to find consensus and common ground, and to convert agreements into effective policies, despite the recent constitutional breakthrough. In this context, the main political risks are: The application of the autonomy process might maintain an open confrontation between the Central Government and regional authorities and could disrupt the day-to-day administrative management of the public sector in "autonomy" departments. This could also disrupt implementation of previously approved Bank supported projects in those areas, as the responsibilities of relevant agencies may shift or become unclear. However, recent Government efforts to lead the autonomic process and ongoing negotiations have shown significant progress. In this context, the World Bank will increase the frequency of portfolio assessments in conjunction with the Government to spur project implementation. The flexibility designed into the proposed ISN provides an adjustable framework to support Bolivia during this transition period. The electoral process that will take place during 2009 may divert the attention of the authorities from public policy design and implementation. However, in this context, the Government's urgency to deliver visible results may help diminish barriers to project implementation. 31 110. Economic risks are mainly related to external conditions since, as discussed earlier, Bolivia's macroeconomic situation is strongly influenced by resources generated by gas and mining exports, as well as by remittances. In addition, social and political uncertainties are having an impact on the investment climate. In this context, the main economic risks are: Growth and employment may decrease more than expected due to the impacts of the global economic crisis through lower exports and weaker remittances, insufficient private investment resulting from the poor investment climate and the risk of additional nationalizations, and the US termination of benefits for Bolivia under the Andean Trade Promotion and Drug Eradication Act (ATPDEA). To mitigate this risk, the Government is preparing an anti-crisis package previously described that will include an employment emergency plan, a mining stabilization fund, a new US$100 million productive fund to support small producers, and a significant increase in public investment. The fiscal situation may worsen more than expected due to falling fiscal revenues as oil prices tumble while gas production and exports are constrained by the lack of investment. In addition, public expenditure may grow due to frail fiscal coordination across different levels of government in a pre-election environment and in a context of deepening decentralization. If a worse-than-expected fiscal situation materializes, the Government might seek to streamline capital expenditures, and is evaluating policies to reduce fuel subsidies while protecting vulnerable groups. Moreover, recent fiscal surpluses allowed significant savings that would be used to face the fiscal impact of the crisis in the short term. Energy supply may be a concern, due to low levels of investment in the electricity and hydrocarbon sectors. As previously mentioned, the limited gas availability may delay necessary investments in thermo-generation. Additionally, low levels of investment in the oil sector may result in shortages in the supply of diesel oil, liquefied petroleum gas (LPG) and other oil derivatives and therefore have an adverse effect on Bolivia's ability to meet export commitments to neighboring countries. The Government has announced plans to address these challenges through a US$100 million investment in electricity production, although the details are pending discussion. Moreover, a US$1 billion credit from the Central Bank to YPFB was included in the 2009 draft budget to boost investment in the sector. The Bolivian economy is strongly exposed to natural disaster risks. 38% of the Bolivian GDP and 37% of Bolivians are in areas at risk from two or more hazards. Disaster impacts on the national economy have been high. The joint Damage and Loss Assessment financed by the Bank estimates the La Niña flood of December 2007 alone to have caused damages and losses worth US$443 million. These risks are expected to be mitigated by the interventions supporting the Sustainable Development Pillar, including two trust funds to enable ex-ante disaster risk management reduction, and the Emergency Recovery and Vulnerability Reduction TA, aimed at supporting disaster risk management in Bolivia. 32 111. Portfolio risks are mostly linked to weak technical teams and lack of coordination among different levels of government, affecting both project preparation and implementation. Wage reductions in the public sector have made it difficult to attract highly skilled public servants, which is further complicated by recruitment and hiring processes that are not always competitive. Bank supported projects face low capacity in Government counterparts due in part to frequent turnover of public servants and consultants, and restrictions in the hiring of consultants to work on both project preparation and implementation. To address this issue, annual portfolio reviews are carried out together with the Government to identify systemic issues in project preparation and bottlenecks in their implementation. Special attention will be given to prevent corruption in Bank-financed projects through the expansion of prior and post review of contracts, specific system procurement audits and periodic training sessions on fiduciary policies, and the design of a strategic supervision plan following an integrated cross-sectoral approach. A process to hire a consultant to support quality control of works under implementation in all sectors is underway. Unclear coordination mechanisms across the three levels of government and unclear definition of public functions result in inefficiencies and diffused accountability. The current autonomy process at the departmental level may worsen this situation. In general, projects are prepared by technical teams that belong to central institutions (i.e. ministries), although implementation and sustainability rely on decentralized levels, primarily municipalities. Lack of coordination and diffused functions and attributions may adversely affect project implementation. In this context, it is essential that the institutional arrangements and the roles and responsibilities during project implementation are clearly spelled out, formally documented, and communicated during all phases of the project cycle. The financial management risk for the portfolio is substantial, and this is the result of the impact of severe salary constraints which adversely affect the Government's capacity to attract and maintain qualified professionals, with subsequent high staff turnover. This has prevented full implementation and effective operation of financial management arrangements, not only in relation to Bank policies and procedures, but also in relation to local requirements. As a mitigating measure, the Bank will continue to provide supervision and technical assistance, focusing on strengthening the internal control systems of institutions that are critical for the implementation of Bank projects. 112. Legal Risks are based on concerns raised by domestic and foreign investors regarding the evolving policy aimed at providing the state with a larger role in the economy. The implementation of the recently approved Constitution, including the implementation of the limit set for future land acquisitions, may create concerns by private investors of a potential risk for the weakening of legal certainty and rule of law. As previously explained, this land limit is not retroactive, and is not expected to negatively impact preexisting land rights. However, the promotion of dialogue between the private sector and the Government 33 to explore possible public-private partnerships, including land ownership modalities, would be helpful in mitigating this risk, thereby increasing the potential to attract private capital. XI. CONSULTATIONS 113. Following Bolivia's long and deeply rooted tradition of consultation and participatory processes, the World Bank Group has carried out a consultation effort that started in the early stages of the strategy design. Consultations have recently been completed in different regions of the country, involving both urban and rural organizations, representatives from civil society, indigenous people and the private sector. Based on the relevance of gender issues in Bank operations and the fact that women are particularly affected by high levels of informality in the labor market, consultations had a special emphasis on women's organizations in order to increase attention to the gender issues that hold back Bolivia's development. Consultations also focused on indigenous people, who are disproportionately represented in the extreme poverty and inequality figures. Additionally, several rounds of consultations have already taken place with the Government, the UN System, and the donor community. The results from these consultations have informed the design of the proposed ISN, and the identification of tentative interventions. Results from these efforts can be found in Annex 6. 34 Annex 1. Progress Implementing the Bank's Strategy FY2007-2009 1. Improved Institutions, Governance and Anticorruption At the time of the FY2007-2009 ISN design, Bolivia experienced a lack of confidence in the political system and government institutions. This was in part due to failed reforms of the central government and civil service intended to increase taxes, improve the efficiency of public expenditure, and reduce corruption. The ISN highlighted Bolivia's ranking (117th out of 159 countries) in the 2005 Corruption Index as indication of this discontent. Limited progress was achieved in the implementation of the planned operations to support the governance pillar, and as a result, no active projects are currently supporting this area. The Bank was expected to assist the Government through two lending projects, aimed at strengthening state efficiency and transparency, and building sound Government monitoring and evaluation systems. Changes in the Government counterparts and lack of clarity in the Government's priorities in this area resulted in the slippage of both operations. The ISN planned to complement the lending operations through two studies: "Making Autonomies Work" and "PEFA Program". The first of these was cancelled because of the uncertainty generated during the process of completing the referenda on the autonomic process and drafting of the new Constitution. The Bank provided PEFA methodology training to Bolivian officials, but the report to assess the quality of the country's public financial management system was discontinued at the Government's request. A formal request from the Government to carry out a new PEFA was recently sent to the Bank, signaling a renewed commitment by the Government in this area. Although it was not anticipated in the ISN, Bolivia participated in the World Bank's 2007 global consultation on "Strengthening World Bank Group Engagement on Governance and Anticorruption" with representatives from congress, the administration, the judiciary, civil society, media and the private sector. Through this process, the Government reiterated its strong commitment to fighting corruption and increasing transparency in the use of public resources; a mandate that has been assigned to the Ministry of Institutional Transparency, and Fight against Corruption. Among the consultations' findings were the importance of donor harmonization in the improvement of governance, and calls for continued World Bank engagement in the Government & Anticorruption (GAC) agenda. Top needs and challenges identified included: (i) a strong systematic training of public and private officers and administrators; (ii) a stable and consistent procurement regulation, (iii) the need for more work on the prevention side, (iv) the need for strengthened internal controls of public institutions, and (v) the judicial reform. In response to this demand, the Bank is expected to convert the slipped operation to strengthen state efficiency and transparency into a non-lending technical assistance to improve the public investment process and the coordination among different government levels. The second operation to establish a monitoring and evaluation system is expected to be delivered as part of the new strategy. The main objective of this operation is to strengthen the Government's capacity to monitor and evaluate public expenditure and will assist both the Ministry of 35 Development Planning and the National Statistics Agency (INE) in building the legal and institutional framework required to improve public service provision in a more decentralized context. In addition, through a Trust Fund, the Bank is supporting Bolivia's congressional efforts to improve and further institutionalize the budget process vis-à-vis the Executive Power as well as initiate the monitoring of public expenditures which will further improve the use of public resources. The project is aimed at a strengthening of the Budget Commission of the Chamber of Deputies. The Bank has also been addressing governance through the inclusion of institutional strengthening components in its projects, paying particular attention to improvements in monitoring and evaluation systems. Despite the delays in the design and implementation of the reforms, the ranking for Bolivia in the corruption index has improved, and Bolivia ranked 112th in 2008. However, concerns remain over the salary cut of high-level public officials, and the weakening of independent branches of government which continue to make efforts to combat corruption more difficult. 2. Job creation through inclusive growth The Government's development plan was designed to spur economic growth through macroeconomic stability and the promotion of productive sectors, particularly in the rural areas, through a mainly state-led commercial approach. Certain sectors (such as hydrocarbons and mining) were expected to generate a surplus that could be used to finance the development of others (such as agriculture, manufacturing, etc.). The goal for the productive sector was to foster areas with increasing value-added and high demand for employment. The challenges identified in the ISN included reconciling the need to maintain the role of the private sector and market-driven mechanisms with the Government's intention to increase the role of the state in the economy. As previously mentioned, the Government was not able to use the additional surplus generated by the hydrocarbons and mining sectors to kick-start labor-intensive sectors because the resources were needed to cover, among other things, costs related to the nationalization process. In addition, the second-tier public Productive Development Bank was expected to channel financial resources (via credits at low interest rate) from strategic sectors, such as gas and mining, to productive activities; but its impact has been negligible. The Government's agenda in the productive sector still needs to appropriately balance private and public concerns in a manner conducive to attracting the private investment flows needed for growth and poverty reduction. The ISN was expected to support this strategic area through three lending operations (in job creation and competitiveness, rural development, and land administration), and two analytical studies (in informality and productivity, and economic integration). The Job creation and competitiveness project suffered several delays and is currently under discussion as a potential operation for FY2011. Following the Government's request to 36 redefine the project's original orientation and to increase its amount from US$15 million to US$40 million, the World Bank is discussing a potential project redesign with the recently appointed team of the Ministry of Productive Development and Plural Economy. According to the Ministry's new strategy, which was developed jointly with the Ministry of Labor, Employment and Social Prevision the potential project could support viable urban small producers with existing and clearly identified demand but suffering bottlenecks in their productive processes. In relation to this initiative, and with the financial support of DfID, the World Bank has led five activities on productive issues prioritized by the Government: (i) a workshop on best practices for access to finance and productive clusters implementation; (ii) a study tour on community tourism to Nicaragua and Guatemala; (iii) a visit of Guatemalan experts to La Paz to look at productive clusters and community tourism; (iv) studies on tourism, manufacturing, mining and agribusiness, commissioned to a consultant firm in conjunction with the IFC; (v) a comprehensive study on trade logistics, commissioned to an international firm, evaluating the logistics effects on trade development, in particular for small and medium enterprises. Bolivia is facing important challenges to improve its traditionally weak investment climate to spur private sector development. In this regard, the ESWs that were delivered during the last ISN period provide advice on productivity and trade issues. Policies for Increasing Firms' Formality and Productivity assessed the productivity constraints faced by Bolivian firms identifying policies to encourage their productivity and formality. These policies vary according to the size of the firm and were prioritized to formulate a comprehensive support program. The study carried out focus groups and surveyed about 600 enterprises. In addition, this study triggered an additional piece of work aimed at Reducing Gender Based Differences in Formality and Productivity which evaluates specific issues on informality among women entrepreneurs. Finally, the economic integration study became the Strengthening Competitiveness for Export Diversification and Inclusive Growth study and evaluated the Bolivian trade policy and its effects on non-traditional labor-intensive exports. This study included evaluations of different trade scenarios and an assessment on logistic issues. The Participatory Rural Investment Project II (PRIP) and the Rural Alliances Project (RAP) aimed at economic development and strengthening institutions. Although the PRIP became effective in January 2009, its implementation started with co-financing from other donors (Denmark and Switzerland). The project is designed to help national government, prefectures and municipalities develop practical instruments to ensure coordination in public investment and reduce duplication of efforts; and has acquired increased relevance within the constitutional reform, which intends to clarify inter-governmental relations. The success of the Rural Alliances Project, which has been active throughout this period, has led the Government to create the Empowering (Empoderar) program, intended as the main line of action to improve access to markets, production and competitiveness on the part of poor rural producers. Success in implementing grants that are managed by the producer organizations themselves has served as an example for other rural development programs and possibly for the new Extreme Poverty Eradication Strategy. An additional Financing to extend the project area to two new zones was approved on April 7, 2009. 37 The Land for Agricultural Development Project was approved by the Board in October 2007, but became effective in March 2009. The effectiveness delay was due, in part, to the Government's request to change the project's financial intermediary and to include additional land acquisition methods to be piloted under the Project Preparation Facility (PPF). The objective of the project is to establish a decentralized beneficiary-driven land distribution mechanism that will allow organized landless or poor farmers to acquire suitable agricultural loans and implement investment projects which would put them on a sustainable, higher- income livelihood path. 3. Social inclusion through improved public service provision. At the time of the ISN design, Bolivia faced substantial social inequality. Education coverage had shown significant improvement, but universal coverage remained a considerable challenge--particularly for rural and indigenous populations--and the quality of education was very low. Health indicators had shown important improvements, such as maternal and infant mortality but the Bolivian health situation remained significantly worse than in the rest of the region. Differences in access between poor and non poor and indigenous and non-indigenous were very high, and the sustainability of social programs to address these challenges was at risk due to their high costs. Improvements in basic infrastructure services in the 1990s had not been enough to bring indicators up to the Latin American average (for example in access to water and sanitation and electricity). Inequalities based on income and differences between rural and urban areas led to a widespread discontent. Coverage to underserved populations, and quality, efficiency, and transparency of services were challenges to be faced by the Government as it evaluated the replacement of private service providers with government-owned companies. The Bank was expected to support the Government in this area through three lending operations in the social sectors (social protection, health, and education), and two lending operations in basic infrastructure (urban infrastructure for the poor, and Lake Titicaca). The indicative program of ESW included a programmatic study in social safety nets. In the social protection sector, the Investing in Children and Youth Project (US$17 million) was approved in March 2008, and became effective in February 2009. The project supports two flagship programs of the Government's Social Protection and Integrated Community Development Strategy: (i) the Bono Madre-Niño, which is under the umbrella of the Zero Malnutrition Program and addresses chronic malnutrition through a conditional cash transfer aimed at benefiting pregnant women and children under two-years-old in the most vulnerable municipalities; (ii) the First Employment Program, a skill-development program for low- income youth living in poor urban areas to enhance their ability to find and maintain a good quality job. The project will also support the Government's capacity to design and manage an effective social protection network in the medium term. These programs are important elements of the upcoming Extreme Poverty Eradication Program. In terms of analytical work, the Bolivia Programmatic Social Protection AAA was a two-year program of dialogue and evidence-based analysis which aimed at informing the Government's social protection strategy. It covered the FY2007-2008 period, and consisted of two phases. 38 The first phase focused on diagnostic analysis of poverty, exclusion and vulnerability and a stocktaking of existing social protection policies and programs. The second phase deepened the dialogue and analysis of policy options, and provided specific analysis and recommendations for operationalizing the strategy, with an emphasis on the roles of sub-national governments and communities, and on the urban dimension of the social protection strategy. The Programmatic AAA proved to be a good mechanism for client engagement and dialogue to inform the Government's strategy. At present, a NLTA is being discussed with the Government to continue the program of advisory services for social protection and poverty reduction. In spite of the ongoing efforts in the sector, there are many challenges that need to be addressed. Poverty has steadily decreased from 65 to 60 percent over the 1999-2006 period, but inequality has stagnated, and the Gini coefficient stands at 0.60--one of the highest in the Region. The indigenous populations are particularly vulnerable. The extreme poverty rate is 36 percentage points higher for the indigenous populations. With urbanization has also come the urbanization of poverty and while the incidence of poverty remains greatest and deepest in rural areas, the number of urban poor (2.9 million) now exceeds that of the rural poor (2.7 million). The urban poor are more likely to be young people and adults of working age, while the rural poor are more likely to be young children and the elderly. The young urban poor are exposed to particular new risks, including child labor, school dropouts­especially at the secondary level--unemployment, gangs, and drug abuse. This calls for differentiated strategies for urban and rural areas as currently proposed in the Government's National Development Plan. In the health sector, the second phase of the Health Sector Reform Program (APL II) was successfully closed by the end of CY2008, having provided continuity to the APL I Project, attaining most of its objectives, and offering a solid starting point for the APL III. In July 2007, the GAIN was signed, donating to the Bolivian Government a total of US$2.64 million for the establishment of the national framework for the fortification of wheat flour, vegetable oil and milk. Despite important improvements in health during the last couple of years, the sector still presents significant challenges that require urgent attention. According to a preliminary report of the 2008 Health and Demography Survey, 21.8 percent of children under five in Bolivia suffer from chronic malnutrition. In rural areas, this indicator reached 32.5 percent and among parents with no education it reached an alarming 44.2 percent. Only 57.7 percent of mothers in rural areas received prenatal healthcare and only 60.5 of all mothers in Bolivia were adequately protected against tetanus. During the last five years only 65.8 percent of all births were attended by trained health personnel, and in rural areas this indicator reached only 41.6 percent. The preceding indicators show not only that the Bank interventions in the sector have been well targeted and appropriate but also that malnutrition and mother/children health are still a priority for the sector agenda as well as for the World Bank's portfolio. Given the accomplishment of trigger indicators as reflected in the evaluation of the APL II Project, the third phase of the APL Program (US$18.5 million) was signed in 2008 and is 39 currently in the Senate for its final approval. At the same time, the GAIN program is entering its final implementation stage to undertake its most significant activities and to be closed by the end of September 2009. The GAIN program supports among others, the National Malnutrition Zero Program, which is one of the flagship programs under the current administration. The APL III Project will not only provide continuity to the Health Sector Reform and support the supply side of health services for the Social Protection Project, but will also be closely aligned with the Government's Extreme Poverty Reduction Program, extending the existing health insurance schemes and enhancing the National Family, Community and Intercultural Health Program. Contrasting the APL I and APL II projects, the APL III will be focused on underserved municipalities instead of operating across the whole national territory. In the education sector, the Secondary Education Transformation Project (US$10 million), approved in FY2008, has recently started its implementation. The Project, implemented by the Municipality of La Paz, is the first investment lending operation in the sector designed and executed at the sub-national level. La Paz represents a unique opportunity to set a standard of innovation in the areas of access and quality of education that can be replicated in similar and smaller municipalities. The Secondary Education Project is supporting the provision and maintenance of education infrastructure and equipment--the main legal responsibility of municipalities in the sector--and complements central Government's activities focused on improving education quality. Specifically, the Project aims at promoting expanded coverage in secondary education and completion in the upper primary and early secondary grades, improving the quality of basic secondary education, and strengthening management capacity at the municipal and school levels. At the national level, although important initiatives have been implemented in the sector over the last years, such as the literacy program Yo Si Puedo and the Bono Juancito Pinto cash transfer for primary students, the passing of the Government's proposed new education law is still pending. The extension of coverage and the improvement of quality of education services remains a challenge, mainly in the pre-primary and secondary levels. The net enrollment rate in pre-primary school was just 38 percent in 2007, and while the net enrollment rate in primary reached 92 percent, Bolivia's 57 percent net enrollment rate in secondary education is a pending task in the sector. The Bank has started discussions with the Ministry of Education to provide a NLTA in areas such as the deepening of the role of sub-national governments in the provision of education services in response to the prevailing decentralization context. Regarding infrastructure projects and their impact on policies aimed at creating better conditions for the provision of basic services to the poor, the innovative design of the Lake Titicaca Sustainable Development Project (US$20 million) which combines the provision of water and sanitation and activities aimed at increasing income levels of the beneficiary population through tourist development activities is being considered as an effective way to create better conditions for the communities surrounding the Titicaca Lake and to decrease the pollution to this water body. 40 Another operation in this area is the Urban Infrastructure Project (US$30 million) aimed at improving basic infrastructure of the poorest neighborhoods in the Municipality of La Paz; support urban transport in the Municipality of El Alto, and extend sewerage coverage and wastewater treatment in the Municipality of Santa Cruz. This project has opened new opportunities to work with large municipalities in departmental capital cities. In fact, the Government has expressed interest in exploring the prospects for additional financing in this area. In this context, the Municipal Services Study, which is currently in progress, will provide important inputs towards a larger potential intervention in the provision of basic infrastructure to the urban poor. Through the Road Rehabilitation and Maintenance Project (US$77 million) the Bank has supported the country's effort to improve road transitability and accessibility in key segments of the national road network and the strengthening of the country's capacity to manage the road assets. The project also included some support to the secondary road network currently administrated by the Prefectures. Despite the fact that the project has been affected by changes in the institutional framework and by higher prices of key construction materials (asphalt, steel and cement, among others) the project has been successful in improving the conditions of key segments of the national network. The rehabilitation of the Calamarca-San Pedro and Boyuibe- Yacuiba segments, has contributed to a reduction in freight transport tariffs from La Paz to Oruro and from the Bolivia's lowlands to Argentina of about 25 percent and 40 percent respectively, and an increase in the number of trucks in those roads of about 15 percent and 34 percent respectively. The Decentralized Infrastructure for Rural Transformation Project (US$20 million) is supporting the Government's effort to improve the delivery of electricity services in rural areas of the country. More specifically, the project is supporting rural converge expansion through Solar Photovoltaic Systems, grid extension to consumers that are close to the grid (densification) and other forms of energy and Information and Communication Technologies (ICT) Investments. The project has been affected by changes in the institutional framework of the energy sector and by the negative impact of El Niño and La Niña on disposable incomes in rural areas. Despite these events, the project has been able to provide solar home systems to 6,000 consumers in isolated and poor rural areas of Bolivia to date, through a mechanism that ensures good installation and operation of the systems, making the IDTR the second largest renewable energy based electrification project by the Bank in Latin America. The scale of both El Niño and La Niña occurrence overwhelmed the ability of both the central and local governments to adequately respond to rehabilitation and recovery needs of the affected population. On December 20, 2007 the Bank approved the Emergency Recovery and Disaster Management Project (US$12.5 million) to mainly respond to the El Niño event; and on June 6, 2008 an additional financing of US$4.4 million was approved to expand the original ERDMP providing additional support to rehabilitate the productive capacity to cover communities affected by floods associated with La Niña event. These operations respond to the objectives of the Ministry of Development Planning 2007 National Plan for Sustainable Rehabilitation and Reconstruction (PRESS), and the 2008-2010 Rehabilitation and Reconstruction National Plan respectively. 41 The Bank is also supporting the Government move from a reactive to a proactive approach to address disaster risk by investing in risk mitigation measures and by improving risk evaluation in planning and reconstruction. This will result in more sustainable investments and a long term commitment to vulnerability reduction. 42 Annex 2. FY2007-2009 ISN Progress to Date 2. A. IDA FY2007-2009 ISN Progress to Date FY Project US$ Progress to date (mill.) Strategic Objectives 2007 Job Creation and Fostering jobs through Under discussion for a potential Competitiveness - growth operation in FY2011. Participatory Rural Fostering jobs through Approved on 12/20/07.Under Investment II 20.0 growth implementation. Community Based Fostering jobs through Approved on 10/30/07. Under Land Administration 15.0 growth implementation. Building Government Enhancing good governance Postponed to FY2010 M&E Systems - and growth Urban Infrastructure for Providing better services to Approved on 11/21/06. Under the Poor 30.0 the poor implementation. Subtotal 65.0 2008 Social Protection Providing better services to Approved on 03/11/08. Under Assistance 17.0 the poor implementation. Secondary Education 10.0 Providing better services to Approved on 10/09/07. Under the poor implementation. Health APL III 18.5 Providing better services to Approved on 01/24/08. Pending the poor Effectiveness. Lake Titicaca 20.0 Providing better services to Approved on 12/20/07. Under the poor implementation. Strengthening State Efficiency and - Enhancing good governance Converted into an NLTA for Transparency and growth FY2010 Disaster Recovery and Vulnerability Reduction 12.5 Emergency Recovery Approved on 12/20/07 Additional financing Disaster Recovery and 4.4 Emergency Recovery Approved on 06/05/08. Vulnerability Reduction Effectiveness is pending. Subtotal 82.4 TOTAL 147.4 43 2.B. IDA FY2007-2009 AAA FY AAA Objectives Strategic Area Diagnostic work on poverty, 2007 Programmatic Social Providing better services to the Protection Study ­ Phase I vulnerability and exclusion, and a stock-taking of social programs. poor Assesses productivity constraints Policies for Increasing faced by Bolivian firms and 2008 Firms' Formality and recommends policies and Fostering jobs through growth Productivity conditions to encourage their formalization Reducing gender-based Provides policy recommendations differences in formality to improve the conditions and Fostering jobs through growth and productivity productivity of women entrepreneurs in the informal sector. Strengthening Evaluates trade policy and its effect Competitiveness for on non-traditional exports. Export Diversification and Fostering jobs through growth Inclusive Growth Provides concrete recommendations Programmatic Social for operationalizing the Providing better services to the Protection Study ­ Phase II Government's Social Protection and Integrated Community poor Development Strategy. Operational Review of the Carried out a review of the Fondo Nacional de procedures of the FPS and provides Enhancing good governance and Inversión Productiva y recommendations to improve its growth Social functioning. 44 Annex 3. World Bank Group Active Portfolio in Bolivia 3. A. IDA Active Portfolio Credit Approval Closing Amount Number Project Date Date Objectives (mill) Sustainable Development 257.3 Improve road transitability and accessibility through the rehabilitation of key segments of the IDA 3630-0/A Road Rehabilitation and Maintenance 16/04/02 31/12/09 77.0 national and secondary road networks and the strengthening of the country's capacity to manage road assets. Expand and improve delivery of electricity through IDA 3788-0/A Decentralized Infrastructure for Rural Transformation 17/06/03 27/11//09 20.0 private-sector led mechanisms as a catalyst for the development of rural areas in Bolivia. Test a model to improve accessibility to markets IDA 4068-0 Rural Alliances and (AF) Rural Alliances 26/05/05 30/09/11 58.4 for poor rural producers in selected sub-regions of the country. Improve the basic infrastructure of the poorest neighborhoods in the Municipality of La Paz, IDA 4247-0 Urban Infrastructure for the improve the urban transportation network in the Poor 21/11/06 30/11/10 30.0 Municipality of El Alto and extend the basic sanitation coverage in the Municipality of Santa Cruz. IDA 4366-0 Land for Agricultural Development 29/10/07 29/06/12 15.0 Pilot a market-based mechanism for land distribution. Support the Government in the reconstruction of IDA 4377-0 Emergency Recovery and Disaster Management 20/12/07 30/06/12 16.9 damages caused by natural disasters and supports the capacity to reduce vulnerabilities. IDA 4378-0 Participatory Rural Investment Support small rural producers to improve their II 20/12/07 16/03/13 20.0 access to the market. IDA 4379-0 Lake Titikaka Local Improve the living standards of the communities Sustainable Development 20/12/07 30/06/13 20.0 around the Lake Titikaka area. Human Development 45.5 IDA 4365-0 Secondary Education Extend the coverage and improve the quality of Transformation 09/10/07 31/12/10 10.0 secondary education in the Municipality of La Paz. IDA 4382-0 Expanding Access to Reduce Increase the coverage and quality of health Health Inequalities (APL III) 24/01/08 31/01/14 18.5 services. Support the design, Financing and implementation IDA 4396-0 Investing in Children and Youth 11/03/08 31/12/13 17.0 of the Government's Social Protection and Integrated Community Development Network. TOTAL 302.8 45 3. B. IFC Active Portfolio 46 3.C. Active Trust Funds Grant Funds Fund Fund Name Donor Name Exec.By Net Grant FY Disb Grant Clos Effective Curr Disb PHRD CCIG-Bolivia: Capacity Japan-Ministry of TF054612 Building to Support Carbon Finance Recipient US$ 502.80 449.81 172.29 11/28/2008 01/08/2007 Finance Transactions IDF-Bolivia: Strengthening of the TF055787 Bolivian Representatives Chamber of IBRD Recipient US$ 212.00 33.12 0.00 12/11/2009 12/11/2006 the Congress TF090206 GPOBA BOLIVIA SHS IFC Recipient US$ 3622.50 35.00 0.00 06/30/2011 09/26/2007 TF090207 GPOBA BOLIVIA SHS DfID Recipient US$ 1552.50 15.00 0.00 06/30/2011 09/26/2007 Global Alliance for Improved Nutrition Trust Fund for TF090522 Strengthening and Implementation of Multiple Donors Recipient US$ 2639.00 300.00 0.00 09/30/2009 07/26/2007 the National Food Fortification Program GFDRR: Bolivia: Technical TF091244 Multiple Donors Bank US$ 360.00 8.38 8.38 06/30/2009 12/01/2007 Assistance Support for Strengthening Disaster Risk Reduction Framework GFDRR:Bolivia: Mainstreaming Adaptive River Defense for Huayhuasi TF091497 & El Palomar Settlements: A Multiple Donors Bank US$ 427.00 0.00 0.00 06/30/2009 12/01/2007 Participatory Model for Development Strategies Strengthening Aid Coordination & Management Capacity for Effective TF091499 IBRD Recipient US$ 170.00 0.00 0.00 12/31/2009 05/15/2008 Monitoring of Official Dev Assistance Project TF054183 BO-GAIN-Global Food Fortification Multiple Donors Bank US$ 297.90 220.25 44.65 09/30/2009 09/01/2004 TF057465 ESMAP : SME BOLIVIA DfID Bank GBP 237.74 222.96 65.65 04/30/2009 10/23/2006 TF057593 ESMAP : SME BOLIVIA IFC DfID Bank GBP 226.27 36.61 4.56 04/30/2009 11/13/2006 TF093028 SIDA-WSP Bolivia Partnership SIDA Bank US$ 454.38 22.53 22.53 12/30/2009 10/03/2008 LAC Child TF to WSP Global Core TF093845 MDTF Multiple Donors Bank US$ 185.00 18.24 18.24 06/30/2014 02/11/2009 TF094130 Tackling Extreme Poverty in Bolivia Multiple Donors Bank US$ 96.75 0.00 0.00 03/31/2010 03/31/2009 10983.84 1361.90 336.30 47 Annex 4. Donor Assistance in Bolivia External financing, including Official Development Assistance to Bolivia, continues to be a significant source of financing for its economy. As of December 2007 total commitments in loans and grants from multilateral and bilateral sources have reached US$3.9 billion. On average, the total new external commitment amount is approximately US$750 million per year, or the equivalent of approximately 9% of GDP. International Cooperation: Commitments and Disbursements (in thousands of US$) Total Total Total Commitments Commitments 2008 Total Commitments Total Disbursements Disbursements (as Disbursements (as of 12/2007) (01-08) (as of 08/2008) (as of 08/2008) of 12/2007) 2008 (01-08) Multilateral IADB 766,130 74,100 840,230 366,502 14,188 380,690 CAF 752,742 336,440 1,089,182 242,361 94,118 336,479 World Bank 223,184 77,500 300,684 132,159 13,113 145,272 Bilateral USAID 464,780 0 464,780 367,946 3,625 371,571 Brazil 213,378 230,000 443,378 0 0 0 EC 303,720 56,250 359,970 220,062 9,248 229,310 Venezuela 0 300,000 300,000 0 0 0 Netherlands 142,277 7,500 149,777 82,055 0 82,055 JICA 105,248 11,949 117,197 50,875 16,026 66,901 KFW 116,031 0 116,031 45,422 2,338 47,760 GTZ 99,211 0 99,211 48,016 5,143 53,159 Denmark 97,599 0 97,599 41,474 5,505 46,979 Spain 82,395 0 82,395 59,887 0 59,887 Others 555,569 24,743 580,312 466,826 9,941 476,767 TOTAL 3,922,264 1,118,482 5,040,746 2,123,585 173,245 2,296,830 In 200810, Bolivia's active external financing portfolio reached approximately US$5 billion, including approximately US$2.75 billion of undisbursed resources. Nearly 51% of the undisbursed resources are in the infrastructure sector (hydrologic resources, energy, and roads11); 14% in the social sector, approximately 10% in the productive sector, and 25% in other sectors such as environment, decentralization, budgetary support, land, legislative power, general administration, and others. The Corporación Andina de Fomento (CAF) was the most important source of multilateral financing in 2008, followed by the World Bank and the IADB. In terms of bilateral support (loans and grants) Venezuela and Brazil provided US$300 million and US$230 million to Bolivia respectively, and were followed by the European Community with US$56 million. Between January and August 2008, Bolivia was only able to disburse US$173 million (US$95 million from commercial loans, US$31 million from concessional loans, and US$48 million from donations). 10Data available up to August 2008. 11Undisbursed resources for the road sector represent 47% of total undisbursed resources (US$1.28 billion). 48 ecna l, AF ,l ece tenni Ruralr + entm II ns (CBTI, Tel n) fied ma foe Soo Poor iversalnU MM) lop Board Progr lio Bank Madnanoittaliib the ncaB millio MM) the for Deve stmente Operatio Inv s,ed Operations TRECO, foryitc to identise es tric (US$28.4 Sector TDE, (US$5.2 com Infrastructur S$20U( ces (US$20MM)a ctureu lturalu raluRy Ans cture til) e, tions rviceSl Ele itted out rtfo subm the : Po nding haeRdaoR Agric can ads MM) lizeda Allian Titikak Infrastr MM) for MM) ator MM) zedlia Banking LoocnaB Mer Infrastru Aguirrl )a era ltura Ro erri Op undsF (GPOBA) be ext, Decentr Rural Lake Urban ndaL Particip IFC's Le Active (US$77 Transformation (US$30MM) (US$30 (US$15 (US$20 A,SIB( ntre will IFC's Agricu Rural CDD ust cont implementation. Dec Banco Centra Trans New Tr Access ISN this ISN In esart the for , re roads c.)et posed e. am hec in theyb wat pro tion of land poor ofe under to or luesavy sicab ion, during the timefr ss ber irriga incom units ert inst e,rutc num landla in improved, tworksen ntsemtse ducate under progre 12 with access Milestones ed landless prop inv (%) ctive ed gea sa ed dei 010-2011 some ork eas ation produ eas mobility are eas sewer governmen sanitation, Incr agricultur entifid Improved Growth Incr of cultiv organized farmers rural urban and rgetat Incr rustarfn(isecivr local se and FY2eth show to Framew fo rk projects anth ni ected rale later exp . toringi vingil ttereb are much Mon mesoctuO inclusion framewoa in equity of .s sev,yl 49 mico dards through rvice alize se NSI econ cultural ants areas sic Additional materi ilestonesmeth Results populationla and ed ba to eas to urban rur 5. Improved social Incr the of poor ssecca while FY2010. ni expected ects,j .n eth on are Annex taininam and to ine nte ntatie proeth y erent of tion staclesbO Stat outcomes productio to ortcese withsmis diff differ the enc lempmi the d an totr need ivat echanm of and ment. ment. theel preth intens'tne fficie ate-owned les thefo across their closingeth role St in ies Thus, start ond of the rode Govern tiona Govern Issues suppodna .y andyt ISN. bey conci le ro Governm sea aci onsi of of will or Re the rket-drivenam itat ies. Cap Undefin Coordin the incre econom lim entit responsibilit levels levels ects thefo upon rs pmentloe proje na Pilla Job urb andy activ urban deve security and and both 11eth completionethe expected deliver results ltural food rural in of befor the Prioritiesci cui ice and ices to Productiv agre both serv Eight teg I:r Productivity in serv areas; 12 eas to shortly refer rural Stra Incr Boost Improve Pilla productivity Creation areas access and asi alitym Climate LTA) of SW)E( hu ) nce, n) pid ) ay stera ma Infor (Nyt W iversalnU saG Ra ndesAl Hu Dis ) leasing, naif (ES Disaster millio of ica illionm for & Bolivia on MM) (ESW) Impacts anethe illion)m MM) Pover in (ESW Progr Review (ESW)tn andy foryitc pact ) tric M Trop Gender lture (US$5.2 onal W Defense Prices advice Ele (US$5) Imeht (US$8.9 Bolivia'sne + cialoS ssme Servicesy lio (US$0.43 Bank y & ate (US$16.9 to thenita ISN udtS Agricu SW)E( ensi tesoNyci orct tossecca,gni Food Asse (ESy rtfo covereRyc Pol zedlia ewatertsa Po (GPOBA) W (Carbon tiona GEF)l River ngthe AAA on -dim SW)E( Seliac Str rty Stud Advisor enabls corpor undsF ntre treeR ade er Palomar to ines Informality Tr PER Economic Multi Rising Crisis CEM Finan Pove Gas IFC nding: Emergen ust Dec Urban Adapt Adaptive El TA AAA Previous (ESW) New Change bus ELB, Le Active Management Tr Access Capture Glaci (Regiona & nt yb me ge s.a e edct at ating na (and of are Ma et ructurt affe s.r aimed integr cepts targ ste and con Milestones Riskr in infras easar silienceer ed in . ste implemented ort disa ies projects ntse lit letedp Disa Res tural Pilot Units working) faci na increasing investm management com ni toy s. cit of vingil yb paac ce disaster mesoctuO of edt nte enili of res 50 dards rnme naturale ate NSI ants affecyl numbera Gov turuf limc in ed eas eviousrp s.r ed to ed eas eas ste Incr Incr Incr areas disa respond investments territories. e-ta toyt staclesbO aci clim d ertsa cap ents. nte eve an dis ine tions. rnme turuf tuasi to Issues eas Gov ted Incr Low rela respond rs pmentole Pilla Dev tural na e and of public of and ate of imcl inable Prioritiesci Susta teg II:r fectsefetheat productiv of gingamad consequences. tandings impactseth ulatem . capacity uate for eq to ad and with under of the es ease changeeat ent responses. Stra Mitig iviti Incr Improve plem Pilla disasters act environmental knowledge clim authorities im change t Climate of Climate resoFeth ce and y ) ci Project rof tiona Project W ma (US$0.36 ) to for tega e str (NLTA) liensieReat mation Health PEEP ncing Forestr Youth (ES Nutrition on ansfor fina Youth III support Impacts (ESW Note chang Tr duceeR MM) and 'ld to Transform and Food and Progr Facility ate Clim to nancingif II II Framework cialoS Bank & SW)E( tesoNyci Adaptation abilityi Idea imlc for Servicesy a cation for MM) Var anlPs rshipe Bank'sno erri lio ce Access ildrenhC on tions/Ad ans rtfo (US$18.5 in Pol and Partn era additional ISN Protection Educationy Children in Allian Program Tr Po Eduyar MM) MM) (US$2.4 Protection Reduction adines worke Advisor ndinga Op undsF Economic Crisis Water-related Re Consultation Pilot IFC Risk MM). AAA Change Change Carbon fram (PPCR) ector,S nding: Second Exp Investing Social Possible ust Global Social Le Active (US$10 Inequalities (US$17 New Secondar Investing Tr (GAIN) AAA Previous yar t- 2 20 and low- living econds quality . ofe (pose ofsyad easra first (10 of ofe under tion. ofe tode tossecca ovedr ulation entagc (mothers) carlat adequatee 18-24 theni imp pop per egnancy easraeth entagc ildren eling/support ed -urbani ch ceiver tervenin entagc ag linkd per monitoring of per per an Milestones ed of ed women e-narp with pr in ed with who counsla ed and eas target eas of iving y)er outhy ention eas old growth eas ainingtr Incr the re)acl ilies, Incr Incr education of pregnant rece nata weeks deliv interv fam arsey areaseth Incr urban child nutrition in income in with in the ritiont 2 the th ine target anth cal in low- living wi after asa( yeary ever mesoctuO rat the malnu iticr orst improved who . of the fac ofe easar phase . 18-24 and months aries 51 otionm chronic entagc ed rban ur ship fici ulation) ag fo NSI pro of oungeryne of skir and easar -ui menty pop ed educationy . alth per per intern childr age he rural ed outhy emplo neeblal ternshipineth eas ction of edt eas and incomes the of Incr Redu ars secondar population among ye ternalam of letedp Incr targe income urban regular labor end arehs targeteth com in y , d acit out in anl cap the and l and barriers and oprd e lled of comein rura staclesbO weak and ciaos poor outhsy ceaf remains befor enro supply old on d les and levels ucation ool andn ed nda msar to ral,ur disadvantageous between an rode ies pulations. arey notear of in based ces erent prog due for tiesciniam schy or et ces (income-related) 18-24 the . Issues diff gea rvies tea ly poel in litiesa eren th letionp educatioy mark diff Undefin the Cover Most secondar Inequ responsibilit of Government. heal protection inadequ demand particular vulnerab living of com tertiar labor conditions and t rs ret eth bet th Pilla tos to lic tionc rablee wie ces pub Developmen vuln na acel oterPl means cop andn and the of Prioritiesci . itab Hum atioc andsk ces with equ teg III:r reu edu rvies ciaoSethe outhy nca riseth effects t.nemyo th mpl Stra Ens Enh Provide Pilla quality heal Network. households reduce negative une ) s nte ent la LTA) SW)E( resg &n stme lopme ) W ma (Nyt (ESWsse Planning Municip ian Con ective Inv Dev (ES Acc of Eff Bolivia for and for Pover in (NLTA) Boliv ber AssistanceveD Public Progr IV Coordinatio Services,y onal Prices onti Marketro National the the the of Cham ) Aid ) of Official (NLTA)ai ation rm visor Procurement Bank ensi (NLTA) Lab tions es pacityaC of Info Ad SW)E( Food and era ninge tiva thening illionm thening illionm ISN Boliv SW) thening in cal (NLTA) Simplification . AAA -dim ecotrP BEE (E Multi CEM Rising alcioS cation Op ent Edu Skills nding: Strength mets undsF tisti AAA FA ust Streng Streng Streng New Le New Sy Tr Repres (US$0.2 Management Monitoring (US$1.7 AAA Previous stemyS Sta IFC's Planning Municipal orecardcS PE OECD-DAC New urban of e. in sub- ented . on ofe the design, in for tiona aclp in ainedtr and scussedid and esci and programs. calti tn former plem ment ortunities. entagc opp per Milestones socialybde msar tion. are evalu blic atists oved.r and agend portretn en ares mpleted. and alsci ngi ed ents.m Assess pu onitorm vestmentin imylla an to pmeol imp ministries ern ssme co prog stemsys stmente menty ed eas cover tervinfo of ofyt . inv program offic monitor ali tiona que ation veedet is designy sector govla public graduy easar ssea Incr Improved ubliP Th emplo poor protection areas monitoring public design, evalu inform ualave Public New rgetat letedp PEFA OECD-DAC outcomes strateg with nation strateg in com Procurement to in eth . thee fo for key to of esi dite sub- wen of among the mesoctuO programs Plan. lse funding, spending enc urementsc exp lev ag ntatione pro and ent ameworkfry th . wi 52 and NSI ormancerfep ublicp ogressrp lignedaear on pmloe dination and anninglp public ands lempmi esi of cena ctureurts ing anslp coor in eaar PFM and ls.e Devl tion andyfilpmis tionalaneth edt gulatorer at accord ediz track Improved ortceS eased ministr ecu tos tion levla ex in tral targe Incr Improved information allow programs. Nationa sector government and the emtsys Updated prepara projects nation MFP decen adrep tode an. oty d an the yb sahs fo Pl cit to es weak align ces ctors and and staclesbO ent paac fo ylree se widesa services. unequally due rvies sev proc provision ny ion, both, have ion roles d to . velopm tional es,ti butioni tos geographical tose of theni ma eht an adle ducate ent ams pu rtlyap strid drocarbonyh ces enter . zatil hin ontc ectorSc welltonear evehica alicos implementd blic are departments Del an or tra ngi ins ies th, progr institu priori and across diff (wit Issues easar venueser from acl and of continu accountability dis tiona se ealh Publi Na tion clusionin it ecende blurra rvice as urban cialos Public Public Unequa zens to to itedmiL Th design the establish coordination, programs distributed municipalities, imbalanced transfers revenues. citi backgrounds loca lim led responsibilit public chus Weak llyaicrt roads. ve n . rs Support y.l ion Pilla and evaluatio la tivece to services inclus and and and programs eff sector ed rnancee ngi Prioritiesci Nationeth anlP lic better pub for eascrin Gov public ent ent PFMethne encyar framework . teg IV:r monitor then plem andyer transp tability Stra Improve im Streng Strength Pilla design, to Developm management deliv procurement improve accoun A)T ) W ma (NLyt (ES Progr Pover aln (ESW) Review (ESW)tn re orct SW (NLTA) ssme ce Servicesy Bank ensio im Agricultu Seliac (Ese SW)E( Asse Not rty Governan Advisor Multid PER Finan CEM Crisis Pove PS IFC Milestones mesoctuO 53 NSI . tally staclesbO horizon .) inyit ts. ac d and zensi capy terparn an citeth iar cou fiduc Issues -à-vis eak W administration) (vis government rs Pilla Prioritiesci teg Stra Annex 6. ISN Consultations Consultations with Civil Society Regional workshops were organized with civil society organizations, in a socio-political context in which national social movements and organizations actively participate in several platforms and actions. Representatives of productive, indigenous and social associations and groups, Municipalities, NGOs, and local authorities participated in a discussion of the main strategic objectives of the ISN. The questions focused on: i) competitiveness and productivity, ii) extreme poverty and social inclusion, iii) the international crisis and its impact for Bolivia, iv) alternatives for coordination with the Prefectures, Municipalities, and other organizations to work towards the common objective of reducing poverty. During March 2009, two workshops were held in Independencia (Cochabamba) and Oruro, where approximately 126 representatives of different organizations participated, including organizations from northern Potosi--one of the poorest regions of Bolivia. A portion of the workshops was held in Quechua, which facilitated the participation of participants from indigenous communities. During the consultations, the Bank shared information about the active portfolio in Bolivia. Participants enquired about other World Bank initiatives and programs in Bolivia, and offered their support for their implementation. There was general agreement about the need to ensure that the resources reach the targeted beneficiaries. While the participants recognized the importance of the Government's conditional cash transfer programs, such as Bono Juancito Pinto and the Bono Dignidad, as instruments to combat poverty, they expressed their aspiration to ensure that other groups, such as youth and women, are also covered. In this context, interest was voiced for decentralizing execution as much as possible. Consultations with Donors The consultation process included both bilateral and multilateral meetings with Ambassadors and Heads of Bilateral Cooperation Agencies of 24 countries from traditional and non traditional (Part II countries) donors, as well as with Representatives from other development agencies, such as Corporación Andina de Fomento (CAF), IADB and the UN. All participants agreed that better and more frequent coordination and information exchange mechanisms are needed to avoid duplication of efforts. In this regard, the World Bank was commended for its leadership. A number of areas for possible joint work were defined. It was also agreed that the World Bank should take an active leadership role in donor coordination and that in this context the next step would entail the promotion of similar exchanges between technical teams of the World Bank and those of other donors, to foster systematic and coherent coordination of development initiatives with the Government. 54 Annex A 1. Bolivia at a glance 4/6/09 Latin Lower Key Development Indicators America middle Bolivia & Carib. income Age distribution, 2007 (2007) Male Female Population, mid-year (millions) 9.5 563 3,437 75-79 Surface area (thousand sq. km) 1,099 20,421 35,510 Population growth (%) 1.7 1.2 1.0 60-64 Urban population (% of total population) 65 78 42 45-49 GNI (Atlas method, US$ billions) 11.7 3,118 6,485 30-34 GNI per capita (Atlas method, US$) 1,230 5,540 1,887 15-19 GNI per capita (PPP, international $) 4,140 9,320 4,544 0-4 GDP growth (%) 4.6 5.7 9.7 15 10 5 0 5 10 15 GDP per capita growth (%) 2.8 4.5 8.6 percent (most recent estimate, 2000­2007) Poverty headcount ratio at $1.25 a day (PPP, %) .. 8 .. Poverty headcount ratio at $2.00 a day (PPP, %) .. 18 .. Under-5 mortality rate (per 1,000) Life expectancy at birth (years) 65 73 69 Infant mortality (per 1,000 live births) 50 22 41 140 Child malnutrition (% of children under 5) 6 5 25 120 100 Adult literacy, male (% of ages 15 and older) 93 91 93 80 Adult literacy, female (% of ages 15 and older) 81 89 85 60 Gross primary enrollment, male (% of age group) 109 120 112 40 Gross primary enrollment, female (% of age group) 109 116 109 20 Access to an improved water source (% of population) 86 91 88 0 Access to improved sanitation facilities (% of population) 43 78 54 1990 1995 2000 2006 Bolivia Latin America & the Caribbean Net Aid Flows 1980 1990 2000 2007 a (US$ millions) Net ODA and official aid 169 545 472 581 Growth of GDP and GDP per capita (%) Top 3 donors (in 2006): United States 40 84 97 193 6 Japan 19 95 44 100 European Commission 1 26 25 52 4 Aid (% of GNI) 3.7 11.8 5.8 5.3 2 Aid per capita (US$) 32 82 57 62 0 Long-Term Economic Trends -2 90 95 00 05 Consumer prices (annual % change) 23.9 18.0 3.4 11.7 GDP implicit deflator (annual % change) 25.0 16.3 5.2 7.4 GDP GDP per capita Exchange rate (annual average, local per US$) 0.0 3.2 6.2 7.9 Terms of trade index (2000 = 100) 401 160 100 110 1980­90 1990­2000 2000­07 (average annual growth %) Population, mid-year (millions) 5.4 6.7 8.3 9.5 2.2 2.2 1.9 GDP (US$ millions) 4,537 4,868 8,398 13,120 -0.2 4.0 3.6 (% of GDP) Agriculture 19.0 16.7 15.0 12.9 1.5 2.9 3.4 Industry 32.4 34.8 29.8 36.4 -2.2 4.1 4.5 Manufacturing 14.4 18.5 15.3 14.7 -1.1 3.8 4.2 Services 48.6 48.5 55.2 50.7 -0.4 4.3 2.5 Household final consumption expenditure 67.3 76.9 76.4 63.2 1.2 3.6 2.8 General gov't final consumption expenditure 13.8 11.8 14.5 14.1 -3.8 3.6 3.4 Gross capital formation 16.6 12.5 18.1 15.2 0.8 8.5 0.3 Exports of goods and services 24.5 22.8 18.3 41.8 1.0 4.5 10.1 Imports of goods and services 22.3 23.9 27.3 34.3 4.4 6.0 6.2 Gross savings .. 10.0 11.0 28.5 Note: Figures in italics are for years other than those specified. 2007 data are preliminary. .. indicates data are not available. a. Aid data are for 2006. Development Economics, Development Data Group (DECDG). 55 Bolivia Balance of Payments and Trade 2000 2007 Governance indicators, 2000 and 2007 (US$ millions) Total merchandise exports (fob) 1,246 4,458 Total merchandise imports (cif) 1,830 3,455 Voice and accountability Net trade in goods and services -608 828 Political stability Current account balance -446 1,593 as a % of GDP -5.3 12.1 Regulatory quality Workers' remittances and Rule of law compensation of employees (receipts) 92 1,040 Control of corruption Reserves, including gold 1,171 5,318 0 25 50 75 100 2007 Central Government Finance Country's percentile rank (0-100) 2000 higher values imply better ratings (% of GDP) Current revenue (including grants) 25.0 33.8 Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue 18.7 27.8 Current expenditure 22.2 19.4 Technology and Infrastructure 2000 2007 Overall surplus/deficit -3.7 1.7 Paved roads (% of total) 6.6 7.0 Highest marginal tax rate (%) Fixed line and mobile phone Individual 13 13 subscribers (per 100 people) 13 41 Corporate 25 25 High technology exports (% of manufactured exports) 40.0 4.4 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 5,785 4,947 Agricultural land (% of land area) 34 35 Total debt service 634 742 Forest area (% of land area) 55.4 54.2 Debt relief (HIPC, MDRI) 1,752 1,526 Nationally protected areas (% of land area) .. 19.5 Total debt (% of GDP) 68.9 37.7 Freshwater resources per capita (cu. meters) .. 33,054 Total debt service (% of exports) 37.3 11.6 Freshwater withdrawal (% of internal resources) 0.5 .. Foreign direct investment (net inflows) 736 240 CO2 emissions per capita (mt) 0.99 0.77 Portfolio equity (net inflows) 0 0 GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) 6.0 6.5 Composition of total external debt, 2007 IDA, 259 Energy use per capita (kg of oil equivalent) 594 578 IMF, 0 Short-term, 176IBRD,0 World Bank Group portfolio 2000 2007 Other multi- (US$ millions) lateral, 1,439 IBRD Total debt outstanding and disbursed 0 0 Private, 2,639 Disbursements 0 0 Bilateral, 434 Principal repayments 12 0 Interest payments 1 0 US$ millions IDA Total debt outstanding and disbursed 1,096 259 Disbursements 61 16 Private Sector Development 2000 2008 Total debt service 1 2 Time required to start a business (days) ­ 50 IFC (fiscal year) Cost to start a business (% of GNI per capita) ­ 112.4 Total disbursed and outstanding portfolio 81 170 Time required to register property (days) ­ 92 of which IFC own account 68 94 Disbursements for IFC own account 15 0 Ranked as a major constraint to business 2000 2007 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 11 32 Economic and regulatory policy uncertainty .. 30.3 Anticompetitive or informal practices .. 28.1 MIGA Gross exposure 77 14 Stock market capitalization (% of GDP) 20.7 17.2 New guarantees 0 0 Bank capital to asset ratio (%) 9.8 9.0 Note: Figures in italics are for years other than those specified. 2007 data are preliminary. 4/6/09 .. indicates data are not available. ­ indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 56 Millennium Development Goals Bolivia With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years) Bolivia Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2007 Poverty headcount ratio at $1.25 a day (PPP, % of population) .. .. .. .. Poverty headcount ratio at national poverty line (% of population) .. 63.2 62.7 .. Share of income or consumption to the poorest qunitile (%) 5.5 2.1 1.3 .. Prevalence of malnutrition (% of children under 5) 8.9 12.6 5.9 5.9 Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) 91 .. 95 95 Primary completion rate (% of relevant age group) .. .. 99 101 Secondary school enrollment (gross, %) .. .. 80 82 Youth literacy rate (% of people ages 15-24) .. .. .. .. Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) .. .. 98 98 Women employed in the nonagricultural sector (% of nonagricultural employment) .. 36 36 32 Proportion of seats held by women in national parliament (%) 9 7 12 17 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 125 105 84 61 Infant mortality rate (per 1,000 live births) 89 76 63 50 Measles immunization (proportion of one-year olds immunized, %) 53 58 79 81 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) .. .. .. 290 Births attended by skilled health staff (% of total) 43 47 69 67 Contraceptive prevalence (% of women ages 15-49) 30 45 53 58 Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases Prevalence of HIV (% of population ages 15-49) .. .. 0.1 0.2 Incidence of tuberculosis (per 100,000 people) 306 267 233 198 Tuberculosis cases detected under DOTS (%) .. 39 74 69 Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 72 78 82 86 Access to improved sanitation facilities (% of population) 33 36 39 43 Forest area (% of total land area) 57.9 .. 55.4 54.2 Nationally protected areas (% of total land area) .. .. .. 19.5 CO2 emissions (metric tons per capita) 0.8 1.1 1.0 0.8 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) 7.4 6.3 6.0 6.5 Goal 8: develop a global partnership for development Telephone mainlines (per 100 people) 2.7 3.3 6.1 7.1 Mobile phone subscribers (per 100 people) 0.0 0.1 7.0 34.2 Internet users (per 100 people) 0.0 0.1 1.4 2.1 Personal computers (per 100 people) 0.2 0.3 1.7 2.4 Education indicators (%) Measles immunization (% of 1-year olds) ICT indicators (per 100 people) 125 100 50 100 40 75 75 30 50 50 20 25 25 0 10 2000 2002 2004 2006 0 0 1990 1995 2000 2006 2000 2002 2004 2006 Primary net enrollment ratio Ratio of girls to boys in primary & Fixed + mobile subscribers Bolivia Latin America & the Caribbean secondary education Internet users Note: Figures in italics are for years other than those specified. .. indicates data are not available. 4/6/09 Development Economics, Development Data Group (DECDG). 57 Annex B 1. Key Economic & Program Indicators - Change from Last CAS Prepared for all CASs/Progress Reports, but included in Board version of Progress Reports Only As Of Date 04/06/2009 Forecast in Last CAS Actual Current CAS Forecast Economy (CY) 2005a 2006b 2007b 2008b 2007c 2008c 2009a 2010b 2011b 2012b Growth rates (%) GDP 4.4 4.1 3.9 3.7 4.6 6.1 3.1 3.5 3.7 3.7 Exports 8.3 5.2 6.7 7.8 3.1 9.4 -2.2 1.0 1.8 2.0 Imports 14.8 17.8 11.7 5.8 4.4 16.3 -4.8 0.4 1.4 2.6 Inflation (%) 4.9 4.6 4.4 4.1 11.7 11.8 7.0 5.2 5.2 5.2 National accounts (% GDP) Current account balance 6.5 6.2 3.6 1.7 12.1 12.1 -1.9 0.5 1.3 1.5 Gross investment 14.3 14.4 15.8 16.8 15.2 16.3 17.6 17.3 17.3 17.4 Public finance (% GDP) Fiscal balance -2.3 0.0 -3.5 -3.9 1.7 5.5 -3.7 -1.8 -1.0 -0.6 Foreign financing 2.2 0.9 1.3 1.9 1.0 1.3 1.6 1.5 1.2 1.0 International reserves 6.4 6.8 7.6 7.8 12.7 14.7 12.4 11.6 11.8 12.2 (as months of imports) Program (Bank's FY) FY05 FY06 FY07 FY08 FY07c FY08c FY09 FY10 FY11 FY12 a b b b d b b b Lending (US$ million) 15 0 43 40 30 117.4 30 90 47 200 Gross disbursements 102 56 60 60 15 15.4 30 30 40 60 (US$ million) a. Estimated year b. Projected year c. Actual outcome 58 Annex B 2. Selected Indicators of Bank Portfolio Performance and Management As Of Date 04/06/2009 Indicator 2006 2007 2008 2009 Portfolio Assessment Number of Projects Under Implementation a 6 5 11 11 Average Implementation Period (years) b 4.7 3.6 1.8 2.5 Percent of Problem Projects by Number a, c 33.3 40.0 9.1 45.5 Percent of Problem Projects by Amount a, c 39.7 50.9 7.3 55.2 Percent of Projects at Risk by Number a, d 33.3 40.0 9.1 54.5 Percent of Projects at Risk by Amount a, d 39.7 50.9 7.3 61.4 Disbursement Ratio (%) e 31.3 15.1 15.5 8.4 Portfolio Management CPPR during the year (yes/no) Y Y Y Y Supervision Resources (total US$) 2.3 2.8 1.18 0.97 Average Supervision (US$/project) 94,000 94,000 95,000 125,000 Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 75 12 Proj Eval by OED by Amt (US$ millions) 1,863.9 370.5 % of OED Projects Rated U or HU by Number 34.7 41.7 % of OED Projects Rated U or HU by Amt 28.5 33.9 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 59 Annex B 3. IBRD/IDA Program Summary and IFC and MIGA Program Summary IBRD/IDA Program Summary As Of Date 04/06/2009 Proposed IBRD/IDA Base-Case Lending Program a Fiscal year Proj ID US$(M) Strategic Rewards b Implementation b (H/M/L) Risks (H/M/L) 2009 (AF) Rural Alliances 30.0 H M Result 30.0 2010 Agricultural Services 15.0 H M Strengthening the National Planning System 20.0 H M Rural Roads 35.0 H M Result 70.0 2011 Social Protection II to Support the PEEP 10.0 H M CDD 10.0 H M Result 20.0 Overall Result 120.0 a. Approximately US$47 million of the IDA 15 allocation has not been allocated into any specific operation, to provide the required flexibility to respond to changing demands due to the evolving global crisis, and the uncertain political and economic environment. 60 IFC and MIGA Program Summary FY 2006-2009 2006 2007 2008 2009 IFC commitments (US$m) 10.6 -- 30.0 1.8 Sector (%) Chemicals 99 Finance & Insurance 1 100 Information 100 Total 100 -- 100 100 Investment instrument(%) Loans 100 100 100 Equity Quasi-Equity Other Total 100 -- 100 100 MIGA guarantees (US$m) 61 olving.s- olving.s- olving.s- olving.s- olving.s- olving.s- olving.s- olving.s- olving.s- olving.s- olving.s- oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem pr pr pr pr pr pr pr pr pr pr pr te, te, -solvingm debate, debate -solving.m solving.-m deba deba olvings- olvings- debate, olvings- bate, de olvings- olvings- olvings- olvings- olvings- te, te, deba deba olvings- olvings- olvings- te, te, deba deba debate, olvings- debate, olvings- olvings- oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem oblem proble public public proble proble public public pr pr public pr public pr pr pr pr pr public public pr pr pr public public public pr public pr pr on, tion,a tion,a tion,a tion,a tion,a tion,a tion,a on,tia tion,a tion,ar on,tia on,tia tion,a tion,a tion,a tion,a tion,a tion,a tion,a tion,a tion,a tion,a on,tia tion,a tion,a tion,a neration, generati gener gener ge generation, gener gener gener gener gener gener gener gene gener gener gener gener gener gener gener gener gener gener gener gener gener gener gener gener b ledge Objective Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge nowledgeK Knowledge Knowledge Knowledge Know Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge Knowledge nowledgeK on. nation.i nation.i natiim nation.i nation.i nation.i nation.i nation.i nation.i nation.i nation.i nation.im nation.i dissem dissem disse ssemdi ssemdi dissem dissem ssemdi ssemdi ssemdi ssemdi disse dissem Services lic Public Pub Public Public Public Public Public Public Public Public Public Public Public nk nk Bank,, Bank,, Bank, a nk Ba ntem Bank,, Bank,, Bank,, Bank,, Ba, Ba, Bank,, Bank,, Bank,, Bank,, Bank,, Bank,, Bank, Donor Donor onor,D Donor Donor ntemn ntemn Donor ntemn Donor ntemn Donor Donor ntemn ntemn Donor Donor ntemn ntemn ntemn Donor Donor Donor ntemn Donor ntemn Nonlending Donor of udienceA Govt, Gov, Gov, Govern Gov, Gov, Gov, Gover Gover Gov, Gover Gov, overG Gov, Gov, Gover Gover Gov, Gov, Gover Gover Gover Gov, Gov, Gov, Gover ov,G Gover Gov, 62 133 161 85 95 200 225 160 97 319 310 170 165 132 214 214 214 132 204 214 132 214 132 214 214 214 132 214 132 214 Summary Cost S$000)U( 4. 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(T inco ate ) Multis vulnerableni icesvr SWE( low nation.i oblem Clim pr Se nance Fi liviaoB A)T( for of ) (NLTA dissem in ) debate, ality Integrationcim 2 Adv. & SW W ntemy pacts ) Net Nets icev ices Study (Ee ) plo Im Poverty public SW eation Ser A) Pr (ES ) ) public (Joint) surveillance A)T(III Cr Gasla onal (E LTA W Em ) A) ) to Social Bank,, 6/2009/0 sn FPS alitym formnI Econo Safety Safety Net Food (N nsie SWE( ality Job LTN(n entm culturi SWE( )ATLN( tion,a qu Natur ure Agr VI (ESs LTN( V II donor 04 letiop fornI enderG and unicipal on Access LTAN(I &cim vieweR ntem gener m tera (SCL) Social Social afetyS M isingR ) ocrP R Note od ) Bolivia BO BO- W BO BO BO Pr W Review co ay BO- BO ducatioE BO- Bolivia PE onocE Multi-dim Sector W 70 31 70 23 89 62 20 15 30 95 18 86 89 (ES DAC Date 45 Protection Policy es 58 ) 29 (ES Assessyt ancen otection Pr SW)E( nt,emn Of oductrP ngtheninge Recent P1059 P1013 P1111 P1047 P1060 P1009 P1064 P1063 Underw P1145 P1066 P1117 P1138 P1121 Planned PEFA OECD- P1120 Social Crisis Str ilimfa Governance W Gover PS P1155 (ES P1154 Financial CEM Pover PS ducationE FA Gover Knowledge As Social PE a. b. Annex B 5. Poverty and Social Development Indicators Bolivia Social Indicators Latest single year Same region/income group Latin Lower- America middle- 1980-85 1990-95 2001-07 & Carib. income POPULATION Total population, mid-year (millions) 6.0 7.5 9.5 562.8 3,437.1 Growth rate (% annual average for period) 2.2 2.3 1.9 1.3 1.1 Urban population (% of population) 50.5 59.4 65.1 78.2 41.7 Total fertility rate (births per woman) 5.1 4.5 3.6 2.4 2.3 POVERTY (% of population) National headcount index .. .. 65.2 .. .. Urban headcount index .. .. .. .. .. Rural headcount index .. .. 83.5 .. .. INCOME GNI per capita (US$) 860 860 1,230 5,540 1,887 Consumer price index (2000=100) 15 78 138 163 144 Food price index (2000=100) .. .. 151 .. .. INCOME/CONSUMPTION DISTRIBUTION Gini index .. 42.0 60.1 .. .. Lowest quintile (% of income or consumption) .. 5.5 1.5 .. .. Highest quintile (% of income or consumption) .. 47.9 63.0 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 4.3 3.3 2.0 Education (% of GNI) .. .. .. 3.6 4.7 Net primary school enrollment rate (% of age group) Total .. 91 95 94 90 Male .. 95 94 94 91 Female .. 87 95 94 90 Access to an improved water source (% of population) Total .. 78 86 91 88 Urban .. 93 96 97 96 Rural .. 56 69 73 83 Immunization rate (% of children ages 12-23 months) Measles 21 58 81 93 77 DPT 33 64 81 92 75 Child malnutrition (% under 5 years) .. 13 6 5 25 Life expectancy at birth (years) Total 56 61 65 73 69 Male 54 59 63 70 67 Female 58 63 67 76 71 Mortality Infant (per 1,000 live births) 100 76 50 22 41 Under 5 (per 1,000) 147 105 61 26 54 Adult (15-59) Male (per 1,000 population) 357 307 238 197 202 Female (per 1,000 population) 273 250 178 107 128 Maternal (per 100,000 live births) .. .. 290 130 300 Births attended by skilled health staff (%) .. 47 67 88 69 CAS Annex B5. This table was produced from the CMU LDB system. 03/18/09 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months who received vaccinations before one year of age or at any time before the survey. 63 Annex B 6. Key Economic Indicators Actual Estimate Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 100 Agriculture 15 14 14 13 13 ... ... ... ... Industry 31 32 35 36 36 ... ... ... ... Services 54 54 51 51 51 ... ... ... ... Total Consumption 84 82 77 77 76 89 86 85 84 Gross domestic fixed investment 12 13 14 16 16 18 17 17 17 Government investment 7 7 8 9 9 11 10 10 10 Private investment 5 6 6 7 7 7 7 7 7 Exports (GNFS)b 31 36 42 42 40 25 26 27 27 Imports (GNFS) 26 32 33 34 32 31 29 29 29 Gross domestic savings 16 18 23 23 24 11 14 15 16 Gross national savingsc 17 20 27 29 28 16 18 19 19 Memorandum items Gross domestic product 8773 9549 11452 13120 17147 17271 18684 19241 20037 (US$ million at current prices) GNI per capita (US$, Atlas method) 960 1020 1110 1230 1470 1640 1810 1860 1920 Real annual growth rates (%, calculated from 90 prices) Gross domestic product at market prices 4.2 4.4 4.8 4.6 6.1 3.1 3.5 3.7 3.7 Gross Domestic Income 7.4 4.2 8.3 3.2 9.0 -11.6 6.8 4.7 4.5 Real annual per capita growth rates (%, calculated from 90 prices) Gross domestic product at market prices 2.2 2.5 2.9 2.8 4.3 1.3 1.7 2.1 2.1 Total consumption 1.0 1.4 2.1 2.3 5.5 1.0 1.5 2.0 2.2 Private consumption 0.9 1.4 2.2 2.4 5.3 1.1 1.6 2.1 2.3 Balance of Payments (US$ millions) Exports (GNFS)b 2562 3280 4351 4954 6824 4323 4898 5166 5430 Merchandise FOB 2146 2791 3875 4458 6313 3790 4347 4607 4856 Imports (GNFS)b 2331 2865 3459 4126 5571 5386 5482 5591 5770 Merchandise FOB 1844 2334 2814 3455 4832 4616 4686 4783 4941 Resource balance 231 415 893 828 1254 -1063 -584 -425 -340 Net current transfers 491 584 822 1268 1349 1150 1149 1152 1111 Current account balance 337 622 1318 1593 2078 -329 98 244 296 Net private foreign direct investment 83 -291 278 362 413 50 75 150 197 Long-term loans (net) 275 171 -1566 -1069 393 358 -61 177 209 Official 314 251 57 113 234 286 292 246 214 Private -39 -80 -1623 -1182 159 72 -352 -69 -6 Other capital(net, incl. errors & ommissions) -556 1 1487 1066 -479 -500 -480 -357 -260 Change in reservesd -138 -504 -1516 -1952 -2404 421 368 -214 -442 Memorandum items Resource balance (% of GDP) 2.6 4.3 7.8 6.3 7.3 -6.2 -3.1 -2.2 -1.7 Real annual growth rates ( YR90 prices) Merchandise exports (FOB) 6.4 25.3 19.6 0.2 10.4 -2.6 0.9 1.9 2.0 Primary 6.6 29.6 20.1 0.1 .. .. .. .. .. Manufactures 5.0 0.8 15.7 1.0 .. .. .. .. .. Merchandise imports (CIF) 4.6 8.8 4.1 10.8 18.0 -6.0 0.1 1.5 2.7 (Continued) 64 (Continued) Actual Estimate Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 Public finance (as % of GDP at market prices)e Current revenues 26.5 30.7 34.2 33.8 37.2 29.9 30.3 30.5 30.3 Current expenditures 23.0 22.9 19.3 19.4 19.4 19.2 18.5 18.0 17.8 Current account surplus (+) or deficit (-) 3.4 7.8 14.9 14.4 17.9 10.7 11.9 12.5 12.5 Capital expenditure 9.2 10.2 10.4 12.7 12.4 14.5 13.8 13.5 13.1 Foreign financing 4.1 2.2 0.4 1.0 1.3 1.6 1.5 1.2 1.0 Monetary indicators M2/GDP 46.3 49.1 51.1 57.4 57.7 57.7 57.7 57.7 57.7 Growth of M2 (%) -7.3 17.1 24.0 26.2 22.4 -3.2 13.0 10.2 10.0 Private sector credit growth / 6.2 116.2 -65.4 295.8 .. .. .. .. .. total credit growth (%) Price indices( YR90 =100) Merchandise export price index 95.7 99.4 115.4 132.5 169.9 104.7 119.1 123.8 127.9 Merchandise import price index 129.5 150.6 174.4 193.3 229.0 232.7 235.9 237.3 238.7 Merchandise terms of trade index 73.9 66.0 66.1 68.5 74.2 45.0 50.5 52.2 53.6 Real exchange rate (US$/LCU)f 83.3 79.8 79.5 81.8 91.5 100.0 106.0 111.6 117.4 Real interest rates Consumer price index (% change) 4.6 4.9 4.9 11.7 11.8 7.0 5.2 5.2 5.2 GDP deflator (% change) 8.0 5.9 13.7 7.4 14.9 -6.1 9.2 6.3 6.1 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 65 Annex B 7. Key Exposure Indicators Actual Estimated Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total debt outstanding and 6222 6908 5266 4947 4734 4390 4100 3849 3653 disbursed (TDO) (US$m)a Net disbursements (US$m)a 291 449 188 328 403 371 -48 225 274 Total debt service (TDS) 519 530 431 742 572 594 618 646 667 (US$m)a Debt and debt service indicators (%) TDO/XGSb 220.9 186.5 102.1 77.5 58.9 80.9 68.5 60.9 55.4 TDO/GDP 70.9 72.3 46.0 37.7 27.6 25.4 21.9 20.0 18.2 TDS/XGS 18.4 14.3 8.4 11.6 7.1 10.9 10.3 10.2 10.1 Concessional/TDO 58.4 53.5 45.4 27.0 .. .. .. .. .. IBRD exposure indicators (%) IBRD DS/public DS 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 Preferred creditor DS/public 95.1 93.8 91.1 88.8 80.7 78.1 76.9 68.7 63.3 DS (%)c IBRD DS/XGS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 IBRD TDO (US$m)d 0 0 0 0 0 0 0 0 14 Of which present value of guarantees (US$m) Share of IBRD portfolio (%) 0 0 0 0 0 0 0 0 0 IDA TDO (US$m)d 1750 1673 233 259 285 324 391 459 525 IFC (US$m) Loans 73 112 99 67 86 80.6* n/a n/a n/a Equity and quasi-equity /c 33 28 28 28 20 17.3* n/a n/a n/a MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. * as of end-March 2009 66 l 58 431 781 een tweBe tuacA a/ s d'veR 70 ent mrF 503. 127987.5 96.00- 99.19 and nce sem ed ur 38 5 699 368 569 134 .52 676 682 747 fferiD ect sbiD .igrO 851 12.31 Exp 3.51 555.58 152.71 4.175- 0.596- 666.42 .2431 1.974 Portfolio b.isdnU 6671.61 2 4 6 1 9 2 9 6 7 9 6 917 683 471 830 144 161 252 861 296 30 .381 15.9 19.6 14.4 19.0 32.2 17.1 18.6 16.3 17.9 8.74 196 . cel Can Disbursed and ns TN RAG Held Millio$ US int A IFC's ounmA ID 20 71 02 51 02 77 .482 03 .961 8.51 01 2.8 27 of al igin Grants) Or and RD IB Statement and BRD/IDA(I r Yea cal 3002 8002 08 08 20 20 8002 2002 05 07 08 20 20 20 8002 08 67 20 Fis Grants), n and Portfolio tio enta 09 SM SM S S S S S IDA 6/200/ R 04etaD PS ngtiaRn MU MU UM UM emlpmI essrgo Pr astL (IBRD/ Operations OfsA isiorvepuS tnempolev De vesictejbO SMarT Sdna MUt MUv UM S Sus De Sse tenni SsDi Portfolio Rurrofsa rendl SorPer Local Chi uraltluc Invlar andc SrTnoita Ru Ma& b. se MUHcudeRot uc Infr me ingn Agrirof ha astructur Rey ss Edyr Re Infn nc .85 9.518 .000 ,0142 22.015 .35 ,1042 22.015 83.691 .000 83.691 Na ntec stie ndaoc ectjo De Inv caactiiTekaL erge andL atorypicrtiaP ad ncailAlar Ro Ru Urba Em cceA.px Se 86 Pr OB OB OB OB OB OB OB OB O-B O-EB O-B Operations 8. di di )de )de B ts paer paer ecjo d)e Pr Annex sedolC * DAI/D e)vitcA(desrubsiD en d)e en en besahhichwfo losC(desrubsiD besahhichwfo oslC+evitcA(desrubsiD di paer besahhichwfo e)vitcA(desrub losC(desrub oslC+evitcA(desrub disnU disnU disnU ectsojrPe IDt 7 4 6 5 8 8 1 9 9 otalT otalT otalT otalT otalT otalT tivcA ecjo 336 108 142 792 129 896 305 397 644 IBR Pr P07 P10 P10 P08 P10 P06 P08 P08 P10 602101P 5 396 P08 ltuseRllarevO Portfolio Disbursed and 68 Held IFC'sfot Statemen 69