63198 For Official Use Only CPSCR Review Independent Evaluation Group 1. CPS Data Country: Costa Rica CPS Year: FY09 CPS Period: FY09 – FY11 CPSCR Review Period: FY09-FY11 Date of this review: July 8, 2011 2. Executive Summary i. This review examines the implementation of the FY09-11 Country Partnership Strategy (CPS) that was issued on July 28, 2008, and was meant to cover the period from August 2008 through at least December 2010. The strategy covered only World Bank activities and no CPS Progress Report (CPSPR) was prepared. ii. The Bank’s CPS as designed around two pillars: (i) addressing emerging challenges to continued growth and competitiveness, including fiscal risk management, and (ii) continuing to reduce income poverty and increase equity in social service provision. Under Pillar 1 the Bank intended to provide support in several areas: improving competitiveness, enabling competition and increasing economic regional integration, promoting regional development in poorer areas, improving secondary education to meet changing labor demands, improving capacity to manage risks associated with exogenous economic shocks, and accelerating natural resource and environmental protection. Under Pillar 2 the Bank intended to provide support in the areas of monitoring poverty trends and targeting, and improving the equity, quality and efficiency of social sector expenditures. iii. The overall outcome of the Bank’s activities in Costa Rica over the FY09-FY11 period is one of mixed results. Outcomes of the partnership strategy were positive in the areas of environment, telecommunications, and helping the government design a new approach to competitiveness. Weak outcomes were observed in regional development, in improving the quality and equity of education, and in helping Costa Rica maintain an appropriate fiscal stance through exogenous shocks. The Bank’s assistance for monitoring poverty trends and targeting did not materialize. Neither did the sustained support that was envisaged with the investment loans of the original CPS. The Bank reacted swiftly to support Costa Rica in its efforts to weather the effects of the global financial crisis, but the support entailed a significant reduction in the breathe of the Bank’s program and the targets that it had set for this support were not fully met. IEG rates the outcome of the strategy as moderately satisfactory, but marginally so. iv. IEG underscores four lessons. First, project implementation in Costa Rica has always been difficult because of the process of consensus building and, in particular, the need to get the Executive to agree with Congress, which approves all foreign borrowing. In preparing projects, the Bank should be more aware of Costa Rica’s political economy. Second, Costa Rica has been a pioneer in designing policies to promote sustainable development and safeguard the environment. The Bank can learn much from Costa Rica in this area and share that knowledge with other countries. Third, the Bank should use CASPR to articulate major changes in a strategy, because of the implications that it has for the achievement of the overall development objectives. A brief assessment of the implications of dropping three investment loans—three fourths of the lending interventions, could have allowed the Bank to better understand what would be needed in the assistance strategy to compensate for that cut, or, if that was not an option, to redefine formally the strategy’s objectives. Fourth, as demonstrated by other country cases, having an office in the country helps the quality and continuity of the dialogue with the authorities and other local stakeholders. CPSCR Reviewed by: Peer Reviewed by: CPSCR Review Coordinator Rene Vandendries Jorge Garcia-Garcia Jaime Jaramillo-Vallejo Consultant, IEGCC Consultant, IEGCC Lead Economist, IEGCR For Official Use Only CPSCR Review 2 Independent Evaluation Group 3. CPSCR Summary Overview of CPS Relevance: Country Context: 1. Costa Rica is a development success story in a number of ways. GDP has grown steadily over many years. Poverty and inequality are much below regional averages while, with few exceptions, social indicators are above those for comparable countries. Also, the country has been a pioneer in promoting sustainable development and safeguarding the environment. The latter is of special importance because the country is subject to natural disasters such as hurricanes and earthquakes yet has a thriving tourist industry based on its rich natural endowment. In parallel to the above, the government’s policy priorities were and continue to be (i) to make further progress in social safety and wellbeing, including social safety nets, education and health services, as well as housing; (ii) to promote safety and social peace by reducing crime; and (iii) to continue to make progress on environmental safety and sustainable development. Objectives of the World Bank Strategy and Handling of Strategic Risks: 2. The Bank’s CPS as designed around two pillars: (i) to address emerging challenging to continued growth and competitiveness, including fiscal risk management, and (ii) to continue to reduce income poverty and increase equity in social service provision. The Bank identified, in consultation with the government, specific activities in these two areas, which initially included four projects, together with analytical and advisory services. In particular, the CPS lending program included investment lending projects in telecommunications, secondary education, and city-port infrastructure development to bolster competitiveness. It also included a Catastrophe Deferred Drawdown Option (CAT-DDO). The total proposed lending volume during FY09 to mid FY11 was US$258 million for the four operations. In addition, the CPS included analytical and advisory services (AAA) in the areas of competitiveness, health sector modernization, management of pension assets, and poverty measurement and targeting. 3. The CPS had identified as one of the risks of the strategy ―an unexpectedly prolonged recession in the United States,‖ and foresaw giving access to the government to a Development Policy Loan with Deferred Draw-Down Option (DPL-DDO), should it be requested. On April 30, 2009 the Bank approved the DPL-DDO for an amount of US$ 500 million. The size of the DPL-DDO forced the Bank to drop three out of the four investment loans originally considered, which were yet to be approved, in order to remain within the exposure limits Despite these changes, the Bank did not reconsider the objectives of its strategy through a CPS Progress Report (CPSPR). The DPL- DDO did give more meaning to the objective of addressing fiscal risk management, by including some specific fiscal policy objectives that were not part of the Bank’s original strategy. Relevance of the World Bank Strategy: 4. The objectives of the CPS were broadly aligned with the priority areas of the government and, in this regard, the strategy was relevant. However, the relevance of the design of the strategy diminished with the substitution of the three investment loan for large DPL-DDO, because the latter instrument could not address the institutional changes needed to bring about improvements in competitiveness and in social service delivery. While the DPL-DDO addressed some of the objectives of the dropped projects, deeper reforms that require project support and sustained engagement, such as curriculum development or education sector management, fell by the wayside. For Official Use Only CPSCR Review 3 Independent Evaluation Group Overview of CPS Implementation: Lending 5. Of the four lending operations foreseen in the CPS, only one became a reality. The CAT- DDO was approved by the Board in September 2008, and became effective shortly thereafter following an earthquake in January 2009. By December 2010, US$25 million had been utilized (about 40 percent of the loan). The remaining three intended projects were dropped with the approval of the DPL-DDO in April 2009. An IMF review of the Stand-By Arrangement in April/May 2010 found that, by then, Costa Rica’s economic recovery had gaining strength, with growth having resumed and both the fiscal outturn and current account deficit better than previously envisaged. The DPL-DDO was fully utilized in August/September 2010, to prepay more expensive debt and improve Costa Rica’s external debt profile. . 6. The three projects approved under the previous CPS and ongoing during the current one had project implementation difficulties. The projects were the FY05 Equity and Efficiency of Education project, the FY06 Mainstreaming Market-based Instruments for Environmental Management project, and the FY08 Port-City of Limon Integrated Infrastructure project. Delays between Board approval and effectiveness for the three projects ranged from 21 to 25 months, mostly on account of delays of the Costa Rican Congress in approving those projects. The most recent supervision reports rate project development outcomes as moderately unsatisfactory for two of the projects and moderately satisfactory for the third. As a result, two out of four projects of the Costa Rican portfolio are currently at risk, a proportion far above Latin American and World Bank-wide averages. AAA 7. Four items of Economic and Sector Work (ESW) and Technical Assistance (TA) were planned in the CPS: a Competitiveness Study and TA for Health Sector Modernization, Pension Investment, and Poverty Measurement and Targeting. Two of these materialized, but the TAs for Health and Pensions were dropped. Overview of Achievement by Objective: 8. The CPS was built on two pillars: (i) addressing emerging challenges to continued growth and competitiveness, including fiscal risk management, and (ii) reducing income poverty and increasing equity in social service provision. . Pillar 1: Addressing Challenges to Continued Growth and Competitiveness 9. Under Pillar 1 the Bank intended to provide support in several areas: improving competitiveness, enabling competition and increasing economic regional integration, promoting development in poorer areas, improving secondary education to meet changing labor demands, improving capacity to manage risks associated with exogenous economic shocks, and accelerating natural resource and environmental protection. As mentioned above, the DPL-DDO gave support to the objective of promoting a sustainable fiscal situation, although, in a broader sense, this objective was part of the effort to improve Costa Rica’s capacity to manage exogenous economic shocks . 10. Improving competitiveness: Costa Rica’s ranking in the Global Competitiveness Index of the World Economic Forum deteriorated slightly, while export performance weakened significantly with the global financial crisis—from double digit growth of over 12 percent in the years leading to the crisis, to negative growth of 7.6 percent in 2009 and a rebound of 6.8 percent in 2010. Bank support took the form of a FY09 Competitiveness Study which was delivered as planned and helped develop the government’s new competitiveness agenda. The agenda now focuses on innovation and improvements in business regulations. In order to elevate the importance given to these issues, a For Official Use Only CPSCR Review 4 Independent Evaluation Group Presidential Council on Competitiveness and Innovation was created. 11. Developing an enabling environment for increased regional competition and integration: With the Central American Free Trade Agreement (CAFTA), Costa Rica’s trade integration has increased somewhat. On average, Costa Rica has been exporting each year about US$ 1.2 billion to other CAFTA member countries, while importing US$ 570 million. The volume of regional trade wavered with the effects of the global financial crisis, falling slightly in 2009 and rebounding in 2010. Bank support in this area focused on telecommunications and was to be provided through a FY09 Telecommunications Reform project. This project was dropped. Nevertheless, as part of the DPL- DDO, important legislation was passed which, among others, allows private entry and increased competition in the telecom sector. At the same time, increased telecom service penetration has progressed less than envisaged. 12. Development in poorer areas: There is no data on how regional development progressed during the CPS period. Bank support came from the FY08 port/city project for Limon and a proposed follow-up project for the port/city of Puntarenas. Progress in implementing the Limon project has been slow and the Puntarenas project was dropped. 13. Improving secondary education to meet changing labor demands: There has been little progress in enhancing the relevance of secondary education to meet changing labor demands. The proposed FY10 Secondary Education and Skills Development project was dropped, making the corresponding outcome indicators in the CPS irrelevant. Instead, a new set of outcome indicators for secondary education, bearing limited relation to the CPS objectives, was included in the DPL-DDO. Outcomes for these indicators were mixed: while enrollment rates increased, drop-out rates did not decline as envisaged. The emphasis of the DPL-DDO was on steps, like establishing a teacher institute or facilitating international standardized testing (such as PISA), all of which will take time to bear fruit. The ongoing FY05 Equity and Efficiency of Education project is focused mainly on quality and equity of rural education and has made little progress to date. 14. Improving capacity to manage risks associated with exogenous economic shocks: Costa Rica faired will through the more testing moments of the global financial crisis, managing to keep overall macroeconomic balances in check. Heavy reliance was placed by the authorities on monetary policy, resulting in a significant appreciation of the Colon in real effective terms of over 12 percent. The Bank supported the government’s efforts to buttress the fiscal situation with the DPL- DDO, mainly by trying to maintain the share of tax revenue in GDP at or above the 15.2 percent level reached in 2007 (―in spite of the impact of the global crisis on growth‖ – DPL-DDO, para 34). In the event, the target was not achieved, and the tax revenue to GDP ratio had dropped to 14.4% by 2010. At the same time, in an effort to boost the economy, the government maintained the pace of public spending and the overall fiscal deficit grew from 0.3 percent of GDP in 2008 to 3.6 percent in 2009. Moreover, government spending included substantial public sector wage increases that are unlikely to be reversed. While the stock of public debt to GDP is expected to increase from 36 percent in 2008 to close to 40 percent in 2010, the ratio of external public debt to GDP is not expected to increase, in part because the resources of the DPL-DDO were used to pay back more expensive external debt. Nevertheless, as part of a fiscal consolidation strategy, recently the government launched a new effort at fiscal reform. 15. Accelerating natural resource and environmental protection: Costa Rica is a leader on environment protection and on sustainable development. During the CPS period, the country’s program of payment for environmental services, whereby land is set aside and payment received for environmental protection, increased coverage from 270 thousand hectares to 283 thousand by February 2010, and widened the number of farmers participating in the program from 1,900 families in 2007 to 9,300 families in 2009. This progress was partly supported by the Bank’s FY06 Maintaining market-based instruments for Environmental Management. IEG notes that enrolling farmers in the program (wherein they promise not to deforest) is not the same as actually providing environmental services. Research has found that less than half a percent of the enrolled parcels For Official Use Only CPSCR Review 5 Independent Evaluation Group would have been deforested annually without payments. However, targeting on at-risk parcels has improved, compared to pre-2000 (likely due to the Bank's project), and the current project has introduced differential payments, which should also boost efficiency in achieving environmental 1 goals. Institutional development in natural disaster preparedness was supported through the Bank’s FY09 CAT-DDO project, which helped strengthen the institutional, legal and planning frameworks. 16. On balance, the outcome for Pillar 1 is rated moderately satisfactory. Positive outcomes in environment, telecommunications and in helping the government devise a new approach to competitiveness, were offset by little progress in regional development, in improving the quality of education, and in helping Costa Rica maintain its tax pressure through the global financial crisis. Pillar 2: Reduce Poverty and Improve Service Delivery 17. Under Pillar 2 the Bank intended to provide support in the areas of monitoring poverty trends and targeting, and improving the equity, quality and efficiency of social sector expenditures. 18. The intended Bank TA to improve the monitoring of poverty trends and targeting did not materialize, nor did the one to strengthen the governance and management of the pension system. As mentioned, Bank efforts to help improve the secondary education system had mixed results, and the FY05 Equity and Efficiency in Education project was much delayed and its outcomes has been rated moderately unsatisfactory in recent supervision reports—moreover, there is no information on completion rates, drop-out rates and the participation of low-income students in the targeted areas. The Bank’s FY02 Health Sector Modernization project did contribute to improvement in the delivery and quality of primary health care. Primary care coverage increased from 91 percent in 2006 to about 92 percent in 2009, the Ministry of Health standards for primary care are now being enforced, and regional health districts are receiving better funding. Procurement of pharmaceuticals is now swifter. 19. On balance, outcome for Pillar 2 is rated moderately unsatisfactory. The good outcomes in health care are offset by the weak outcomes in equity of education and the lack of effort on monitoring poverty trends and targeting. Pillars CPSCR Rating IEG Rating Pillar 1 NA Moderately Satisfactory Pillar 2 NA Moderately Unsatisfactory 1 Robalino, Pfaff, Sanchez-Azofeifa, Alpízar, León, and Rodríguez, ―Changing The Deforestation Impacts of Ecopayments: Evolution (2000-2005) in Costa Rica’s PSA Program,” Duke University Working Paper, 2008. For Official Use Only CPSCR Review 6 Independent Evaluation Group 4. Overall IEG Assessment Outcome: Moderately Satisfactory Bank Performance: Moderately Unsatisfactory 20. Outcome: This review suggests that the overall outcome of the Bank’s activities in Costa Rica over the FY09-FY11 period is mixed. The overall outcome of the partnership strategy was positive in the areas of environment, telecommunications, and the government’s new approach to competitiveness. Weak outcomes were observed in developing poorer areas, in improving the quality and equity of education, and in helping Costa Rica maintain its tax pressure through the global financial crisis. The Bank’s assistance for monitoring poverty trends and targeting did not materialize. Neither did the sustained support that was envisaged with the investment loans of the original CPS. IEG rates the outcome of the strategy as moderately satisfactory, but marginally so. 21. Bank Performance: The FY09-11 CPS was aligned with the government’s strategy and the Bank responded swiftly to the government’s request for support to weather the global financial crisis . The crisis support, however, had major implications for the Bank’s support to longer-term institutional objectives that were not fully assessed at the time of the approval of the DPL-DDO. Moreover, the results matrix of the strategy turned out to be unrealistic for the period and the circumstances of Costa Rica. Implementation of ongoing projects has proceeded exceedingly slowly, primarily because of delays in project effectiveness due to the traditionally slow process of consensus building in Costa Rica and the ex-ante controls by the supreme audit institution, to which the Bank did not devise an adequate response. While the Bank managed to maintain a dialogue with the government, having an office in San Jose could probably have helped improve project implementation and execution. In addition, the CPS program of AAA was only partially implemented. On balance, World Bank performance is rated moderately unsatisfactory. 5. Assessment of CPS Completion Report 22. This is a concise CPSCR. The Summary Table of CPS Program Self-evaluation is comprehensive and covers the result-matrices of both the CPS and the DPL-DDO, being helpful in some regards but confusing the differences between the objectives of a Bank strategy and those of a particular intervention. The CPSCR could have been clearer about the implications of dropping three of the four projects in the CPS and the resulting shortcomings in strategy implementation—in fact the CPSCR is silent about the outcome indicators where the Bank decided to drop the projects without making it explicit in a strategy document. 6. Findings and Lessons 23. The CPSCR contains several good lessons, but the two most important ones of these are not prominent in the text. First, project implementation in Costa Rica has always been difficult because of the process of consensus building and, in particular, the need to get the Executive to agree with Congress, which approves all foreign borrowing. In preparing projects, the Bank should be more aware of Costa Rica’s political economy. Second, Costa Rica has been a pioneer in designing policies to promote sustainable development and safeguard the environment. The Bank can learn much from Costa Rica in this area and share that knowledge with other countries. A third lesson not included in the CPSCR is that the Bank should use CASPR to articulate major changes in a strategy, because of the implications that it has for the achievement of the overall development objectives. A brief assessment of the implications of dropping three investment loans—three fourths of the lending interventions, could have allowed the Bank to better understand what would be needed in the assistance strategy to compensate for that cut, or, if that was not an option, to redefine formally the strategy’s objectives with participation of the Executive Board. Fourth, as demonstrated by other country cases, the Bank may wish to consider that having an office in the country helps the quality and continuity of the dialogue with the authorities and other local stakeholders. Annexes CPSCR Review 7 Independent Evaluation Group Annex Table 1: Planned and Actual Lending, FY09-11 Annex Table 2: Planned and Actual Analytical and Advisory Work, FY09-11 Annex Table 3a: Project Ratings for Costa Rica, FY09-11 Annex Table 3b: IEG Project Ratings for Costa Rica and Comparators, FY09-11 Annex Table 4: Portfolio Status for Costa Rica and Comparators, FY09-11 Annex Table 5: IBRD / IDA Net Disbursements and Charges Summary Report for Costa Rica Annex Table 6: Total Net Disbursements of Official Development Assistance and Official Aid, 2004 - 2009 Annex Table 7: Economic and Social Indicators for Costa Rica and Comparators, 2007 - 2009 Annex Table 8: Costa Rica - Millennium Development Goals Annex Table 9: Summary of Achievements of the CPS Objectives Annexes CPSCR Review 9 Independent Evaluation Group Annex Table 1: Planned and Actual Lending, FY09-11 Product Proposed Approval Proposed Approved Project ID Project Line FY FY Amount Amount Programmed projects IBRD/IDA Telecom Sector Modernization 2009 Dropped 13 P111926 IBRD/IDA CAT-DDO 2009 2009 65 65 IBRD/IDA City-Port of Puntarenas 2010 Dropped 100 Secondary Education Quality & IBRD/IDA Competitiveness 2010 Dropped 80 Total Programmed projects CAS FY09-11 258 65 Non-programmed projects P115173 IBRD/IDA CR Pub Fin & Compet. DPL/ DDO 2009 500 Total projects CAS FY09-11 excluding Grants and Special Financing Projects 258 565 Grants and Special Financing projects P120320 IDF Integration of Disaster Risk Info in CR 2010 Recipient Towards a neighborhood Improvement Executed and Slum Eradication National Policy - P113426 Activities Costa Rica 2009 Recipient Costa Rica Pilot on Early Warning Executed Systems for Hydrometeorological P122206 Activities Hazards 2010 Recipient Executed CR Port regional'ion & hinterland P122111 Activities access 2010 Total projects CAS FY09-11 including Grants and Special Financing projects 258 565 Source: Costa Rica CPS and WB Business Warehouse Table 2a.1, 2a.4 and 2a.7 as of 5/5/2011. Annexes CPSCR Review 10 Independent Evaluation Group Annex Table 2: Planned and Actual Analytical and Advisory Work, FY09-11 PIN Proposed FY Delivered to Client FY Output Type Economic and Sector Work Planned (CAS FY09-11) P111555 Competitiveness Study 2009 2009 Report Non-planned Technical Assistance Planned (CAS FY09-11) Health Sector Modernization TA (fee for service) 2009 Dropped Pension Investment TA (fee for service) 2009 Dropped "How-To" P111791 Poverty Measurement &Targeting (Phase Ill) 2009 2010 Guidance Non-planned FIRST: Costa Rica Strength public debt "How-To" P105465 management 2009 Guidance Institutional Development P101524 CR Poverty Update 2010 Plan "How-To" P119561 CR Competitiveness NLTA 2011 Guidance Institutional Development P116002 CR Education 2011 Plan Client Document P122245 Costa Rica PEFA 2011 Review Costa Rica: Financial Crisis Simulation Program "How-To" P121422 FIRST # 9048 2011 Guidance "How-To" P124287 CR: Gemloc Country Policy Dialogue 2011 Guidance Source: Costa Rica CPS and WB Business Warehouse Table ESW/TA 8.1.4 as of 5/5/2011, and Imagebank. Annexes CPSCR Review 11 Independent Evaluation Group Annex Table 3a: Project Ratings for Costa Rica, FY09-11 Closed Projects Evaluated by IEG IEG Risk to Total Evaluated Exit FY Project Name IEG Outcome Development PIN (US$M) Outcome * CR-Health Sector Strengthening & MODERATELY NEGLIGIBLE 2010 5.17 P073892 Moderni SATISFACTORY TO LOW Source: Operations, Client Connection and WB Business Warehouse Table 4a.5 and 4a.6 as of 5/5/2011. * With IEG new methodology for evaluating projects, institutional development impact and sustainability are no longer rated separately. ** This project was rated with IEG previous methodology. Ratings are: IEG Sustainability - "Likely‖; IEG ID Impact - "Modest". Annex Table 3b: IEG Project Ratings for Costa Rica and Comparators, FY09-11 Total RDO % Total Outcome Outcome RDO % Moderate or Region Evaluated Moderate or Evaluated ($M) % Sat ($) % Sat (No) Lower ($) * (No) Lower (No) * Costa Rica 5 1 100 100 100 100 Nicaragua 35 3 100 100 100 67 Guatemala 77 3 100 100 4 33 Honduras 38 2 34 50 100 100 LCR 2656 67 91 79 80 73 World 12697 302 87 75 71 58 Source: WB Business Warehouse Table 4a.5 and 4a.6 as of 5/5/2011. * With IEG new methodology for evaluating projects, institutional development impact and sustainability are no longer rated separately. Annexes CPSCR Review 12 Independent Evaluation Group Annex Table 4: Portfolio Status for Costa Rica and Comparators, FY09-11 Fiscal year 2009 2010 2011 Costa Rica # Proj 6 5 4 # Proj At Risk 3 2 2 % At Risk 50 40 50 Net Comm Amt 722 708 208 Comm At Risk 117 103 103 % Commit at Risk 16 14 49 Guatemala # Proj 7 7 9 # Proj At Risk 3 4 3 % At Risk 43 57 33 Net Comm Amt 403 432 564 Comm At Risk 172 239 224 % Commit at Risk 43 55 40 Honduras # Proj 16 15 11 # Proj At Risk 5 3 3 % At Risk 31 20 27 Net Comm Amt 406 399 327 Comm At Risk 108 55 119 % Commit at Risk 27 14 36 Nicaragua # Proj 14 13 15 # Proj At Risk 2 4 3 % At Risk 14 31 20 Net Comm Amt 288 316 358 Comm At Risk 32 59 65 % Commit at Risk 11 19 18 LCR # Proj 294 302 301 # Proj At Risk 69 64 69 % At Risk 23 21 23 Net Comm Amt 26,128 32,045 32,884 Comm At Risk 3,296 5,315 3,319 % Commit at Risk 13 17 10 World # Proj 1,552 1,590 1,598 # Proj At Risk 344 366 346 % At Risk 22 23 22 Net Comm Amt 131,076 158,287 160,309 Comm At Risk 19,930 28,186 24,203 % Commit at Risk 15 18 15 Source: WB Business Warehouse Table 3a.4 as of 5/5/2011. Annexes CPSCR Review 13 Independent Evaluation Group Annex Table 5: IBRD/IDA Net Disbursements and Charges Summary Report for Costa Rica (in US$ million) Net FY Disb. Amt. Repay Amt. Net Amt. Charges Fees Transfer 2009 4.1 8.0 -3.9 1.9 .5 -6.3 2010 38.6 8.3 30.3 1.3 .3 28.7 2011 507.0 8.3 498.7 5.9 1.3 491.4 Total (2009- 549.6 24.6 525.1 9.2 2.2 513.7 2011) Source: WB Loan Kiosk, Net Disbursement and Charges Report as of 5/5/2011. Annexes CPSCR Review 14 Independent Evaluation Group Annex Table 6: Total Net Disbursements of Official Development Assistance and Official Aid, 2004- 2009 (in US$ million) Bilaterals 2004 2005 2006 2007 2008 2009 2004-2009 Austria 0.1 0.01 0.03 0.13 0.23 0.18 0.11 Belgium 0.59 4.11 0.82 0.49 0.2 0.45 1.11 Canada 2.89 2.98 2.75 3.85 2.86 2.07 2.90 Denmark .. .. .. .. .. .. Finland 0.65 1.17 1.76 1.66 1.54 0.94 1.29 France 5.78 4.89 5.37 23.05 6.64 4.69 8.40 Germany 8.91 5.36 7.39 3.22 29.67 15.01 11.59 Greece 0.01 0.01 .. 0.02 0.03 0.02 0.02 Ireland .. .. .. .. .. .. Italy -0.4 -0.39 -0.47 -0.45 -0.41 -0.38 -0.42 Japan -5.24 -1.41 6.08 17.32 -1.16 58.29 12.31 Korea 0.53 0.45 0.65 1.73 0.83 0.09 0.71 Luxembourg 0.01 .. .. 0.06 .. 0.12 0.06 Netherlands 12.18 3.25 1.03 1.82 4.7 3.8 4.46 New Zealand 0.07 .. 0.06 0.02 .. .. 0.05 Norway 4.63 5.19 0.09 0.32 0.46 0.69 1.90 Portugal .. .. .. .. .. .. Spain 9.93 2.25 3.04 9.99 15.48 9.31 8.33 Sweden 1.18 1 0.92 1.08 0.99 1.07 1.04 Switzerland 1.09 2.69 1.3 0.65 0.09 0.35 1.03 United Kingdom -15.94 5.91 -0.46 -11.97 -0.15 2.56 -3.34 United States -15.05 -12.01 -9.6 -2.89 -0.12 -0.55 -6.70 DAC Countries, Total 11.92 25.46 20.76 50.1 61.88 98.71 44.81 Czech Republic 0.07 0.08 0.09 0.13 0.18 0.21 0.13 Israel 0.22 0.13 0.16 0.12 0.19 0.1 0.15 Poland .. .. .. .. .. 0.01 0.01 Slovak Republic 0 .. .. .. .. 0.01 0.01 Thailand .. .. 0.01 0.01 .. 0.01 0.01 Turkey .. .. .. .. .. 0.06 0.06 Other Donor Countries, Total .. .. .. 0.21 0.02 0.01 0.08 Non-DAC Countries,Total 0.29 0.21 0.26 0.47 0.39 0.41 0.34 Multilaterals GEF 0.2 0.45 10 5.14 .. 5.65 4.29 Global Fund 1.39 0.48 0.45 0.73 0.43 .. 0.70 IAEA .. .. 0.2 0.3 0.16 0.51 0.29 IDA -0.16 -0.16 -0.16 -0.16 -0.16 -0.16 -0.16 IDB Spec. Fund -10.89 -6.39 -9.74 -9.26 -6.49 -7.72 -8.42 UNAIDS .. .. 0.02 0.12 0.02 0.09 0.06 UNDP 0.52 0.44 0.41 0.68 1.21 0.73 0.67 UNFPA 0.31 0.38 0.46 0.53 0.63 0.61 0.49 UNHCR 1.06 0.8 0.29 0.25 0.92 2.18 0.92 UNICEF 0.58 0.71 0.57 0.59 0.76 0.58 0.63 UNTA 0.67 1.23 0.87 0.75 0.74 0.74 0.83 EU Institutions 6.88 2.21 7.32 7.91 6.77 5.86 6.16 Multilateral Agencies, Total 0.56 0.15 10.69 7.58 3.85 10.21 5.50667 All Donors, Total 12.77 25.82 31.71 58.15 66.12 109.33 50.65 Source: OECD DAC Online database, Table 2a. Destination of Official Development Assistance and Official Aid - Disbursements, as of 4/29/2011. Annexes CPSCR Review 15 Independent Evaluation Group Annex Table 7: Economic and Social Indicators for Costa Rica and Comparators, 2007- 2009 Costa Rica Costa Rica Nicaragua Guatemala Honduras LCR World Series Name 2007 2008 2009 Average 2007-2009 Growth and Inflation Real GDP growth (annual %) 7.8 2.6 -1.5 3.0 1.7 3.4 2.8 2.8 1.2 GDP per capita growth (annual %)2/ 6.3 1.2 -2.8 1.6 0.4 0.9 0.8 1.6 0.0 GNI per capita, PPP (current international $) 10,610.0 11,040.0 10,930.0 10,860.0 2,600.0 4,616.7 3,743.3 10,474.1 10,488.5 GNI per capita, Atlas method (current US$) 5,528.5 6,058.8 6,260.0 5,949.1 1,008.6 2,596.0 1,734.9 6,757.4 8,507.1 Inflation, consumer prices (annual %) 9.4 13.4 7.8 10.2 11.5 7.0 7.9 Composition of GDP (%) Agriculture, value added (% of GDP) 8.7 7.3 7.1 7.7 20.0 12.3 13.0 6.1 2.9 Industry, value added (% of GDP) 28.8 29.0 27.2 28.3 31.0 29.3 28.1 31.8 27.3 Services, etc., value added (% of GDP) 62.5 63.7 65.7 64.0 49.0 58.5 58.9 62.1 69.8 Gross fixed capital formation (% of GDP)3/ 21.8 32.6 26.7 27.0 30.4 17.5 28.9 20.5 20.9 Gross domestic savings (% of GDP) 19.8 27.1 20.9 22.6 -3.0 3.0 3.3 22.2 20.9 External Accounts Exports of goods and services (% of GDP) 48.8 45.9 43.3 46.0 35.5 24.5 49.3 23.1 27.4 Imports of goods and services (% of GDP) 53.6 55.6 42.1 50.4 69.5 38.3 75.5 22.7 27.6 Current account balance (% of GDP)2/ -6.3 -9.3 -1.8 -5.8 -19.1 -3.2 -8.3 .. .. External debt (% of GDP)2/ 33.0 31.8 28.1 30.9 70.6 40.1 26.4 .. .. Total debt service (% of GNI) 3.6 5.4 4.3 4.4 7.7 4.8 2.9 4.0 Total reserves in months of imports1/ 3.2 2.6 3.6 3.1 3.1 3.6 2.7 7.9 12.7 Fiscal Accounts Revenue (% of GDP)1/ 15.5 15.9 14.1 15.1 32.6 12.0 18.8 .. .. Expenditure (% of GDP)1/ 14.9 15.7 17.5 16.0 32.9 14.0 22.8 .. .. Overall Balance (% of GDP)1/ 0.6 0.2 -3.4 -0.9 -0.3 -2.0 -4.0 .. .. Net Public Debt (% of GDP) 46.4 39.0 42.1 42.5 62.1 26.5 22.2 .. .. Social Indicators Health Life expectancy at birth, total (years) 78.8 78.9 79.0 78.9 73.1 70.3 72.2 73.4 68.9 Immunization, DPT (% of children ages 12-23 months) 89.0 88.0 86.0 87.7 95.3 93.7 95.0 92.1 81.7 Improved sanitation facilities (% of population with access) .. 95.0 .. 95.0 52.0 81.0 71.0 79.4 60.6 Improved water source (% of population with access) .. 97.0 .. 97.0 85.0 94.0 86.0 93.4 86.8 Mortality rate, infant (per 1,000 live births) 10.0 9.8 9.6 9.8 22.9 33.3 25.7 19.7 44.3 Population Population, total (in million) 4.5 4.5 4.6 4.5 5.7 13.7 7.3 572.5 6,697.8 Population growth (annual %) 1.4 1.3 1.3 1.4 1.3 2.5 2.0 1.1 1.2 Urban population (% of total) 62.7 63.3 63.8 63.3 56.7 48.6 47.9 78.6 49.9 Education School enrollment, preprimary (% gross) 61.1 68.8 69.9 66.6 54.9 29.0 39.3 67.8 43.2 School enrollment, primary (% gross) 109.6 109.9 109.9 109.8 116.6 113.5 117.4 .. 106.2 School enrollment, secondary (% gross) 87.5 89.2 96.1 90.9 68.5 56.1 64.2 .. 66.8 1/ Source: Economist Intelligence Unit. The data for Guatemala and Honduras are for the Central Government. Source: WB World Development Indicators (5/5/2011) for all indicators excluding those noted. Annexes CPSCR Review 16 Independent Evaluation Group Annex Table 8: Costa Rica - Millennium Development Goals 1990 1995 2000 2009 Goal 1: Eradicate extreme poverty and hunger Employment to population ratio, 15+, total (%) 56 58 58 57 Employment to population ratio, ages 15-24, total (%) 48 48 46 43 Income share held by lowest 20% 4 3.9 4.1 4.2 Malnutrition prevalence, weight for age (% of children under 5) 2.5 4.5 .. .. Poverty gap at $1.25 a day (PPP) (%) 3 2 1 0 Poverty headcount ratio at $1.25 a day (PPP) (% of population) 9 7 4 1 Prevalence of undernourishment (% of population) 5 5 5 5 Vulnerable employment, total (% of total employment) 25 23 24 20 Goal 2: Achieve universal primary education Literacy rate, youth female (% of females ages 15-24) .. .. 98 99 Literacy rate, youth male (% of males ages 15-24) .. .. 97 98 Persistence to last grade of primary, total (% of cohort) .. .. 90 94 Primary completion rate, total (% of relevant age group) 74 81 87 96 Total enrollment, primary (% net) 87 89 90 .. Goal 3: Promote gender equality and empower women Proportion of seats held by women in national parliaments (%) 11 16 19 37 Ratio of female to male primary enrollment (%) 99 100 98 99 Ratio of female to male secondary enrollment (%) 105 109 109 106 Ratio of female to male tertiary enrollment (%) .. .. .. .. Share of women employed in the nonagricultural sector (% of total nonagricultural employment) 37.2 36.7 39.3 41.5 Goal 4: Reduce child mortality Immunization, measles (% of children ages 12-23 months) 90 91 82 81 Mortality rate, infant (per 1,000 live births) 16 13 12 10 Mortality rate, under-5 (per 1,000) 18 14 13 11 Goal 5: Improve maternal health Adolescent fertility rate (births per 1,000 women ages 15-19) .. .. 82 67 Births attended by skilled health staff (% of total) 98 .. 98 99 Contraceptive prevalence (% of women ages 15-49) .. 75 80 80 Maternal mortality ratio (modeled estimate, per 100,000 live births) 35 42 41 44 Pregnant women receiving prenatal care (%) 95 .. 70 90 Unmet need for contraception (% of married women ages 15-49) .. .. .. .. Goal 6: Combat HIV/AIDS, malaria, and other diseases Children with fever receiving anti-malarial drugs (% of children under age 5 with fever) .. .. .. .. Condom use, population ages 15-24, female (% of females ages 15-24) .. .. .. .. Condom use, population ages 15-24, male (% of males ages 15-24) .. .. .. .. Incidence of tuberculosis (per 100,000 people) 18 16 14 10 Prevalence of HIV, female (% ages 15-24) .. .. .. 0.1 Prevalence of HIV, male (% ages 15-24) .. .. .. 0 Prevalence of HIV, total (% of population ages 15-49) 0.1 0.1 0.1 0.3 Tuberculosis case detection rate (%, all forms) 41 110 110 93 Goal 7: Ensure environmental sustainability CO2 emissions (kg per PPP $ of GDP) 0.2 0.2 0.2 0.2 CO2 emissions (metric tons per capita) 1 1.4 1.4 1.8 Forest area (% of land area) 50 .. 47 51 Improved sanitation facilities (% of population with access) 93 94 95 95 Improved water source (% of population with access) 93 94 95 97 Marine protected areas (% of total surface area) 12 12 12 12 Goal 8: Develop a global partnership for development Debt service (PPG and IMF only, % of exports, excluding workers' remittances) 22 13 7 6 Internet users (per 100 people) 0 0.4 5.8 34.5 Mobile cellular subscriptions (per 100 people) 0 1 5 43 Net ODA received per capita (current US$) 74 9 2 24 Telephone lines (per 100 people) 9 14 23 33 Other Fertility rate, total (births per woman) 3.2 2.8 2.4 1.9 GNI per capita, Atlas method (current US$) 2210 3250 3700 6260 GNI, Atlas method (current US$) (billions) 6.8 11.3 14.6 28.7 Gross capital formation (% of GDP) 18.5 18.2 16.9 19.7 Life expectancy at birth, total (years) 76 77 78 79 Literacy rate, adult total (% of people ages 15 and above) .. .. 95 96 Population, total (millions) 3.1 3.5 3.9 4.6 Trade (% of GDP) 66.5 77.9 94.4 85.4 Source: World Development Indicators database as of 4/29/2011. Annexes CPSCR Review 17 Independent Evaluation Group Annex Table 9: Summary of Achievements of the CPS Objectives CPS 09-11: Pillar 1 Actual Results Comments Promote Sustainable Economic Growth (as of current month year) Objectives 1. Improve competitiveness 2. Effectively manage increased economic integration 3. Promote greater investment in poorer areas to stimulate equitable growth 4. Improve secondary education to meet changing labor market demands 5. Improve capacity to manage risks related to a global recession, tighter financial market conditions, and terms of trade shocks 6. Accelerate protection of biodiversity and natural resources and decrease carbon footprint 7. Strengthen the Tax System -Major 1. Improve competitiveness Outcome Measures Begin implementation of the government The Global Competitiveness Negligible Progress. competitiveness and growth strategy, with an Index has deteriorated: Costa Source: CPSCR. emphasis on infrastructure, the investment Rica ranks 56 in 2010-2011 climate, and skills development compared to 55 in 2009-2010. 2. Effectively manage increased economic integration –SUTEL issued concessions to Ensure greater private sector participation in Some Progress. private companies to provide telecom sector (baseline: state-owned ICE is Source: CAPCR Internet, international leased the only cellular provider in 2007) line and other telecom P115173 Public Finance and services. Competitiveness Development Policy Following the competitive Loan with Deferred Drawdown Option bidding process to open up the ICR. March, 2011. cellular phone market, that ended in December 2010, SUTEL (telecommunications regulatory authority) recommended the Government that Band 3 (850 Mhz) be Annexes CPSCR Review 18 Independent Evaluation Group CPS 09-11: Pillar 1 Actual Results Comments Promote Sustainable Economic Growth (as of current month year) awarded to the Spanish company Telefónica, and Band 1 (1,800 and 2,100 Mhz) to the Mexican company América Móvil. The Government has yet to make a decision. Increase telecom service penetration and Telephone density was not Some Progress. investments, particularly in rural and isolated measured. In 2010, the density Source: CPSCR. poor areas (baseline: telephone density 60% of cellular telephones is 68 % in 2007; target 100% by 2012) having increased from 40% at end 2008. Fixed lines the density remains around 30 percent. 3. Promote greater investment in poorer areas to stimulate equitable growth Ensure Small and Medium Enterprises growth This outcome has not been No Progress due to delay of the project. in the tourism and cultural sectors (baseline: 0 met. new SMEs in 2007) in Limon Ensure Small and Medium Enterprises growth This outcome has not been No Progress due to cancelation of the in the tourism and cultural sectors in met. project. Puntarenas Improve access to sewerage in Limoncito This outcome has not been No Progress due to delay of the project. (baseline: 38% of pop. with access in 2007) met. Reduce port handling costs (baseline: US$ This outcome has not been No Progress due to delay of the project. 0.08/ton in 2007) in Limon met. Improve transport connections in Puntarenas This outcome has not been No Progress due to cancelation of the met. project. 4. Improve secondary education to meet changing labor market demands Improve the relevance of the curriculum to This outcome has not been No Progress due to cancelation of the labor market demands met. project. Facilitate school to work transitions This outcome has not been No Progress due to cancelation of the met. project. Improve efficiency and management within This outcome has not been No Progress due to cancelation of the the sector met. project. 5. Improve capacity to manage risks related to a global recession, tighter financial market conditions, and terms of Annexes CPSCR Review 19 Independent Evaluation Group CPS 09-11: Pillar 1 Actual Results Comments Promote Sustainable Economic Growth (as of current month year) trade shocks Ensure that Ministry of Finance and Central No Progress. Bank of Costa Rica are issuing debt Source: CPSCR. according to a coordinated strategy More recently there is less coordination. Ensure Regulatory framework supports the No Progress. implementation of a risk-based debt strategy Source: CPSCR. and the development of a domestic debt market A new Debt Management Law is unlikely. Instead, reforms to Law 8131 are being proposed. Provide a unified IT architecture capturing No Progress. information on external and domestic debt as Source: CPSCR. well as guarantees Good Progress. Develop risk reduction strategies for Costa implemented a disaster Source: CPSCR emergency response and diversified risk risk management framework, management in case of a natural disaster focusing on actions to mitigate P111926 Costa Rica Catastrophe natural disaster risks and lower Deferred Draw Down Option (CAT DDO). the country’s vulnerability. February, 2011. 6. Accelerate protection of biodiversity and natural resources and decrease carbon footprint Increase land under Costa Rica’s Payment for The land with environmental Good Progress. Environmental Services Program (PSA-Pago service contracts generating Source: P093384 Mainstreaming Market- por Servicios Ambientales) (baseline: 270,000 environmental services of local, Based Instruments for Environmental ha. in 2007) national and/or global importance increased to Management Project. ISR. February, 282,989 ha by February of 2011. 2010 compared to a target of 288,000 ha by July of 2012. More recent information is not available. Increase allocation of water tariff revenue to The water tariff revenue to the Good Progress. the PES (baseline: 0% in 2007) PES was US$2.47 million by Source: CPSCR. 2010. Ensure full capitalization of the Biodiversity No Progress. Endowment Fund Source: P093384 Mainstreaming Market- Based Instruments for Environmental Management Project. ISR. February, 2011. A full capitalization is in final discussion with outside donors. Increase participation of small farmers and 9,293 families participated in Good Progress. landowners in Payment for Environmental Annexes CPSCR Review 20 Independent Evaluation Group CPS 09-11: Pillar 1 Actual Results Comments Promote Sustainable Economic Growth (as of current month year) Services Program (PES) Program (baseline: 2009. Source: CPSCR. 1,900 in 2007) Ensure application of differentiated payments By February of 2010 three Good Progress. among farmers different kinds of PES contracts Source: P093384 Mainstreaming Market- are being implemented as Based Instruments for Environmental follows: (i) USD$ 320/ha in 5 Management Project. ISR. February, years for forest conservation; 2011. (ii) USD$ 375/ha in 5 years for biodiversity conservation in critical areas where there was no prior conservation and (iii) USD$400/ha in 5 years for water services. 90% of the total number of contracts is for forest conservation; 8% of the contracts are for biodiversity conservation, and 2% for watershed protection. Increase reforestation of degraded The reforestation was Good Progress. agricultural land in Perez Zeledon (baseline: implemented for 907 ha by Source: CPSCR. 241ha. in 2007) February 2010. 7. Strengthen the Tax System Maintain the GDP share of tax revenues at or The GDP share of tax No Progress. above the level achieved in 2007 (15.2% of revenues was 14.4% of GDP at Source: P115173 Public Finance and GDP) the end of 2010. Competitiveness Development Policy Loan with Deferred Drawdown Option ICR. March, 2011. Increase a number of users of e-based No information is available. No Progress. taxation to represent at least 50% of all central government tax revenues Ongoing P085539 Port-City of Limon Integrated Latest PDO rating: Moderately pre Infrastructure Project Unsatisfactory, ISR, February, 2011. CAS/CPS 07-10 P093384 Mainstreaming Market-Based Latest PDO rating: Moderately Support Instruments for Environmental Management Satisfactory, ISR, February, 2011. Project New ICR Outcome rating: Satisfactory, March, Lending P115173 CR Pub Fin & Compet. DPL/ DDO 2011 Support Latest PDO rating: Highly Satisfactory, P111926 CAT-DDO ISR, February, 2011. New Non- Lending Support (Grants Annexes CPSCR Review 21 Independent Evaluation Group CPS 09-11: Pillar 1 Actual Results Comments Promote Sustainable Economic Growth (as of current month year) and Special Financing Projects) Planned AAA P111555 Competitiveness Study Additional AAA P119561 CR Competitiveness NLTA P105465 FIRST: Costa Rica Strength public debt management P116002 CR Education P122245 Costa Rica PEFA P121422 Costa Rica: Financial Crisis Simulation Program FIRST # 9048 Annexes CPSCR Review 22 Independent Evaluation Group CPS 09-11: Pillar 2 Actual Results Comments Reduce Poverty (as of current month year) Objectives 1. Enhance Government capacity to monitor poverty trends and target resources 2. Improve the equity, quality and efficiency of social sector expenditures Major 1. Enhance Government Outcome capacity to monitor poverty Measures trends and target resources Introduce improved poverty measurement This outcome has not been No Progress due to cancelation of and policy tools across ministries met. the project. Develop a new poverty targeting system This outcome has not been No Progress due to cancelation of in Ministry of Housing and Human met. the project. Development with a unified registry of social program beneficiaries 2. Improve the equity, quality and efficiency of social sector expenditures Increase primary school completion rates No information is available. Unknown Progress. in 4 targeted areas (Norte, Atlantico, Source: P057857 CR Equity and Puntarenas, Guanacaste) with high Efficiency of Education. ISR. indigenous populations (baseline: 69.3% February, 2011. in 2004) This outcome was part of the CR Equity and Efficiency of Education Project, which is rated as moderately unsatisfactory and lacks any progress measurement in the ISR. Reduce over-age and drop-out rates in No information is available. Unknown Progress. the 4 targeted regions: (in baseline over- Source: P057857 CR Equity and age rate is 11.8% in 2007, drop-out rate is Efficiency of Education. ISR. 5.3% in 2007) February, 2011. This outcome was part of the CR Equity and Efficiency of Education Project, which is rated as moderately unsatisfactory and lacks any progress measurement in the ISR. Increase percentage of low income No information is available. Unknown Progress. students in 4 targeted areas served by Source: P057857 CR Equity and poverty-targeted programs (baseline: Efficiency of Education. ISR. 10% in 2007) February, 2011. Annexes CPSCR Review 23 Independent Evaluation Group CPS 09-11: Pillar 2 Actual Results Comments Reduce Poverty (as of current month year) This outcome was part of the CR Equity and Efficiency of Education Project, which is rated as moderately unsatisfactory and lacks any progress measurement in the ISR. Expand primary care coverage (baseline: There was an increased Some Progress. 91% in 2006) access to integrated Source: CPSCR networks of health services. P073892 Health Sector About 92% of the population Strengthening and Modernization II is covered by health Project. ICR. June, 2010. insurance that finances access and continuity of care for primary health care services as well as secondary and tertiary level of care by the end of 2009. Strengthen compliance of primary care 100 % of performance Good Progress. services with Ministry of Health standards agreements between central Source: CPSCR authorities and social security health care P073892 Health Sector providers include outcome Strengthening and Modernization II indicators in line with Project. ICR. June, 2010. priorities established by the MOH by the end of 2009. Provide greater equity in funding The gap between the Good Progress. allocations across regional health districts average per capita spending Source: P073892 Health Sector in the Brunca Region and Strengthening and Modernization II the National Average was Project. ICR. June, 2010. reduced from 46% in 2002 to 13.1% in 2009, an overall reduction of about 72% compared with an original target of 60%. Ensure modernization of the There was 50% decrease of Good Progress. pharmaceutical system, including time between initial bid and Source: CPSCR reduction in procurement time delivery of pharmaceuticals P073892 Health Sector instead of 40% of original Strengthening and Modernization II target by the end of 2009. Project. ICR. June, 2010. The establishment of a new management unit devoted to improve procurement and distribution of pharmaceuticals along with development of some new electronic tools have increased efficiency of management from purchasing to delivery at the health center units. Annexes CPSCR Review 24 Independent Evaluation Group CPS 09-11: Pillar 2 Actual Results Comments Reduce Poverty (as of current month year) Improve governance and operations of No information is available. No Progress. CCSS’ pension assets Ongoing P057857 CR Equity and Efficiency of Latest PDO rating: Moderately pre Education Unsatisfactory, ISR, February, 2011. CAS/CPS 07-10 P073892 Health Sector Strengthening IEG outcome rating: Moderately Support and Modernization II Project Satisfactory New ICR Outcome rating: Satisfactory, Lending P115173 CR Pub Fin & Compet. DPL/ March, 2011 Support DDO New non- lending Support (Grants and Special Financing Projects) Planned P111791 Poverty Measurement AAA &Targeting (Phase Ill) P111791 Poverty Measurement &Targeting (Phase Ill) Additional P101524 CR Poverty Update AAA P116002 CR Education