Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 25240

IMPLEMENTATION COMPLETION REPORT(SCL-39430)

ONA

LOAN

IN THE AMOUNT OF US$3 10.0 MILLION

TO

NACIONAL FINANCIERA, S.N.C. (NAFIN)WITH THE GUARANTEE OF THE

UNITED MEXICAN STATES

FOR A

SECOND BASIC HEALTH PROJECT

December 30, 2002

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 2002)

Currency Unit = Pesos $US$ 1.00 = P$10.16

FISCAL YEARJanuary 1 - December31

ABBREVIATIONS AND ACRONYMSCAS Country Assistance StrategyCOMPRANET Internet Procurement MechanismDALYS Disability Adjusted Life YearsDGEC Direcci6n General de Extension de CoberteroGDP Gross Domestic ProductGOM Government of MexicoICB International Competitive BiddingIMSS Mexican Social Security InstituteIMSS-SOL Mexican Social Security Institute - Solidarity ProgramISSSTE Social Security Institute for Public EmployeesMIS Management Inforrnation SystemNAFIN National Financing Agency (Nacional Financiera)NCB National Competitive BiddingOECD Organization for Economic Cooperation and DevelopmentOPD Decentralized Public Agencies (Organismos Publicos Descentralizados)PABSS Package of Essential Health ServicesPAHO Pan American Health OrganizationPAC Second Basic Health Care Project (Programa de Ampliaci6n de

Cobertura)PCU Project Coordination UnitPROCEDES Program for Quality, Equity and Development in Health (Programa de

Calidad Equidad y Desarrollo en Salud)PROGRESA Education, Health and Nutrition ProgramQCBS Quality and Cost Based SelectionREDSSA SSA's Management Information NetworkSBDs Standard Bidding DocumentsSECODAM Secretariat for Control and Administrative DevelopmentSHA State Health AuthoritiesSHCP Federal Secretariat of Finance and Public CreditSSA Federal Secretariat of HealthTAPS Primary Health Care WorkersUNICEF United Nations Children FundWHO World Health Organization

Vice President: David De FerrantiCountry Director: Isabel Guerrero

Sector Director and Sector Manager: Ana-Maria Arriagada and Evangeline JavierTask Team Leader/Task Manager: Patricio Marquez

MEXICOMX: BASIC HEALTH H

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 14. Achievement of Objective and Outputs 65. Major Factors Affecting Implementation and Outcome 166. Sustainability 177. Bank and Borrower Performance 188. Lessons Learned 219. Partner Comments 2410. Additional Information 27Annex 1. Key Performance Indicators/Log Frame Matrix 28Annex 2. Project Costs and Financing 30Annex 3. Economic Costs and Benefits 33Annex 4. Bank Inputs 34Annex 5. Ratings for Achievement of Objectives/Outputs of Components 37Annex 6. Ratings of Bank and Borrower Performance 38Annex 7. List of Supporting Documents 39

Project ID: P007689 Project Name: MX: BASIC HEALTH IITeam Leader: Patricio V. Marquez TL Unit: LCSHH

ICR Type: Core ICR Report Date: December 30, 2002

1. Project Data

Name: MX: BASIC HEALTH II L/C/TFNumber: SCL-39430Country/Department: MEXICO Region: Latin America and

Caribbean RegionSector/subsector: Health (90%); Central government administration

(7%); Sub-national government administration (3%)

KEY DATESOriginal Revised/Actual

PCD: 03/29/1994 Effective: 01/08/1996 03/15/1996Appraisal: 11/07/1994 MTR: 09/15/1998 04/12/1999Approval: 09/26/1995 Closing: 06/30/2001 06/30/2002

Borrower/Implementing Agency: NAFIN/SSA AND SHCPOther Partners:

STAFF Current At AppraisalVice President: David de Ferranti Shahid Javed BurkiCountry Manager: Isabel Guerrero Edilberto L. SeguraSector Manager: Evangeline Javier Kye Woo LeeTeam Leader at ICR: Patricio Marquez Annin FidlerICR Primary Author: Willy de Geyndt

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: HS

Sustainability: HL

Institutional Development Impact: H

Bank Performance: HS

Borrower Performance: HS

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The objectives of the Second Basic Health Care Project in Mexico (Loan 3943-ME) were to support:

(a) equitable access to a cost-effective package of quality health services for the uninsured andunderserved;

(b) the decentralization of technical, managerial, and financing processes to the states; and(c) the modernization and restructuring of the Federal Health Secretariat (SSA) to divest itself fromoperational responsibilities and to assume a stewardship role in the sector.

The Project's development objectives were realistic, achievable and consistent with the ZedilloGovernment's (1994-2000) health sector strategy of reducing inequities in access to basic health care,targeting the economically least-developed states, and improving quality and resource use. Experience andlessons learned under the First Health Care Project (Loan No. 3272-ME), initiated in 1991 and completedin 1996, provided valuable input to Project preparation. In addition, a health sector study that was initiatedby the Salinas Administration in 1994, with the assistance of the Bank, IDB, and PAHO/WHO, helpedoutline priority sector policies and investment, the appropriate roles of the Federal Health Secretariat(SSA), social security, non-governmental organizations (NGOs) and the private sector, the means forstrengthening sector financing and the efficient use of health resources. The Project's content reflected abroad consensus in Mexico for a three-pronged approach for an equitable access to health care that aimedto:

(i) promote access to basic health care services;(ii) foster institutional development and decentralize services and functions; and(iii) support the modernization of the SSA at the federal level.

Thus, the Project's development objectives and its three components were completely aligned with theGovernment's health sector strategy and the Bank Group's Country Assistance Strategy (CAS).

As noted above, Project preparation benefited from the lessons learned and experience from implementingthe First Basic Health Care Project. Prominent lessons highlighted the importance of: (a) improving thetargeting of the delivery of a cost-effective basic health care package in the most disadvantagedmunicipalities within poor states; (b) rehabilitating first level health centers and second level hospitals toimprove access to basic health care; (c) recruiting and training community health care workers to staffhealth posts in communities where no medical doctor is available; (d) building ownership in the statesthrough institutional capacity development and decentralization of Project implementation; and (e)conducting joint annual review meetings to evaluate the previous year's work plans and prepare next year'sinvestment and implementation plans.

In 1994, the Zedillo Administration realized that inequitable access to basic health care, especially by thepoor and indigenous population, hampered economic development, jeopardized investments in basiceducation and deprived citizens of their constitutional right to attaining good health. It, therefore, aimedto implement aggressively a strategy of reducing these inequities and improving health care quality andresource use. Also, it placed priority on the modernization of the SSA. A Health Cabinet (Gabinete deSalud), headed by the President with representatives from social security, finance and other social sectorentities, was created by presidential decree. The Health Cabinet's role was to guide the SSA'srestructuring, promote coordination among sectors, and oversee the decentralization of health services tothe states. In sum, the Second Basic Health Care Project's development objectives reflected theGovernment's health sector reform program and counted upon its full political commitment.

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3.2 Revised Objective:

The Project's development objectives were not revised during implementation. It must be noted, however,that the baseline of the Project's target beneficiary population was refined in 1997 (see Section: Component1 Basic Health Services) and the Project's geographical coverage was expanded from the original 11 statesto cover a total of 19 states.

The Project's development objectives were reconfirmed by the Government and the Bank at the mid-termevaluation in April 1999. During the mid-term evaluation, it was agreed that: (i) the loan closing datewould be extended by one year to June 2002 to give the new Government (then taldng office in December2000) time to consolidate its decentralization process, the reorganization of the SSA, and the establishmentof institutional and financial arrangements at the state level to ensure long-term sustainability; (ii) loanproceeds would be reallocated among the different categories in Schedule 1 of the Loan Agreement toreduce the amounts allocated for civil works, consultants, studies and technical assistance, and increase theamount allocated for operational expenses (i.e. US$127 million); and (iii) the Project's financialarrangements would be restructured to allow the reallocated amounts to be disbursed on a revised decliningpercentage basis. The latter two amendments required Board approval because the reversal of the"declining percentage financing" for incremental recurrent costs (i.e. applying anew the 86 percent, 66percent and 33 percent pari-passu for the reallocated amount) was a departure from Operational ManualStatement (OMS) 1.21 I/ Also, the amendments almost doubled the amount allocated to recurrent costs 21since additional funding was needed under this category to cover the Project's expanded geographical scope(see subsequent sections for more details). The Project's integrity was not affected by this reallocation ascivil works and most of the activities proposed under Components II and IH were financed by alternativefederal and state funding sources outside the Project financing arrangements (i.e. the agreed Bank-GOMpari-passu in the Loan Agreement). These modifications were reflected in an Amendment to the LoanAgreement, the Guarantee Agreement and the Implementation Letter approved by the Bank's Board on ano-objection basis on June 30, 1999. The allocation of the loan proceeds were fine-tuned three more timesbetween 1990 and 2002. The loan was fully disbursed by the extended closing date.

3.3 Original Components:The Project had three components, financed with a US$310 million IBRD loan and US$133.4 million innational counterpart funds (i.e. within the Bank-GOM financing share as stipulated in the LoanAgreement). These were:

Component I. Basic Health Care Services (US$335.3 million, or 75.6 percent of total Project costs).This component would provide basic health care services to a targeted number of uninsured, hard-to-reachpopulation in Mexico. The Project area included eleven states (Oaxaca, Chiapas, Guerrero, Hidalgo,Puebla, Veracruz, Zacatecas, Michoacan, San Luis Potosi, Campeche and Yucatan) at the outset, of whichfour had been included in the First Basic Care Health Project. These areas were selected using a povertytargeting mechanism based on the CONAPO (Consejo Nacional de Poblacion-National PopulationCouncil) poverty index 3/ and included only those with health indicators below the national average.Selection of health jurisdictions and municipalities within each participating state followed the sameselection criteria. The selection criteria ensured effective targeting of Project activities in line with theGovernment's poverty alleviation policy and its objective to ease the health problems of the uninsuredpopulation.

The Project's design contemplated the possibility of increasing the coverage of its geographic area duringimplementation. This provision was included in the Staff Appraisal Report (SAR) and in the Loan

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Agreement (Section 1.02 (i)), which specified that only an exchange of letters between the Governmentand the Bank, and adjustments to the Project's Operational Manual would be required to reflect ageographic expansion. To reach pockets of population in extreme poverty and areas of difficult access, theZedillo Government requested a geographic expansion of the Project to include an additional seven states in1997 and another state in 1999 thus reaching a total of nineteen participating states at the time of themid-term evaluation. The additional states were: Chihuahua, Durango, Guanajuato, Jalisco, Mexico,Nayarit, Queretaro, and Sinaloa. These additions were selected using the same criteria applied to theProject's original eleven states.

At appraisal in 1994, it was roughly estimated that 15 million uninsured people or 53 percent of the totalpopulation of the original eleven priority states would constitute the target population. This roughestimate was based on the 1990 CONAPO poverty index, as well as epidemiological and demographicsurveillance data. In 1990, 32 percent of the population and 38 percent of the country's uninsured poorwere estimated to live in these eleven states. Each participating state conducted a diagnostic survey todetermine those health jurisdictions that were to be included in the Project area using the same selectioncriteria for choosing the priority states. As a result of this exercise, the Project was set to target theneediest people living in areas where both economic and health conditions were the worst During the firstyear of operation, the Project was implemented in 16 of the total 78 health jurisdictions in the eleven states,benefiting a population of 3.8 million.

This rough estimate of the total target population was useful for planning purposes during Projectpreparation, particularly for selecting the Project areas and the target population for the first year ofimplementation. It is important to note, however, that this rough estimate was refined and adjusted in1997 in accordance with the Zedillo Government's Health Sector Reform Program 1995-2000. ThisProgram set as its main goal the improvement of access to basic health services among the poorest 10million Mexicans living in remote rural locations. As the Project's geographic areas were expanded totarget only those municipalities with "high and very high" poverty rates within 19 states, the baseline forthe target number of Project beneficiaries was set to a total of 10.9 million people during the life of theProject (to be covered in conjunction with other related programs of the Federal Health Secretariat).

In addition, the Project supported the Government in carrying out the recommendations of the 1993 WorldDevelopment Report (WDR, Investing in Health), which promoted redirecting health expenditures to themost cost-effective interventions ("buy the cheap Disability Adjusted Life Year (DALYs) first").

Two strategies were posited to improve the health status of the target population:

(a) strengthening public health interventions that benefit the whole population: health education, vectorcontrol, vaccinations, food hygiene, water quality, latrines, etc.; and

(b) providing a cost-effective package of essential clinical services meeting the health needs ofindividuals: reproductive health, child health, treating infectious diseases (intestinal infections,pneumonia, etc.), and treating chronic diseases (diabetes, asthma, hypertension, etc).

With Project support, Mexico became one of the first countries in the world to adopt as its national policythe provision of a basic package of cost-effective interventions to those populations without access tohealth services in order to reduce the burden of disease, as measured in DALYs. The Project'scost-effectiveness calculations were based on the model suggested by the Bank's 1993 WDR using theconcept of DALYs. The concept was further elaborated in the Mexican Health Foundation (FUNSALUD):"El Paquete Universal de Servicios de Salud"; Documento #11 Para el Analisis y la Convergencia,1994.

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In terms of expenditures for this component, the Project would finance the construction (10,800 sq.meters) and upgrading (321,051 sq. meters) of physical facilities; provision of basic medical instruments,office and laboratory equipment; supply of pharmaceuticals from an essential drug list and procurement offamily planning devices; purchase of radio equipment and vehicles (400 ambulances, 1,320 mobile units,180 motorcycles and 180 bicycles); and training of 2,260 primary care technicians, midwives andcommunity volunteers. An important innovation would be the financing of an incentive hardship premium,in addition to the basic salary, to attract and retain qualified staff (3,405 staff), including itinerant healthteams.

ComDonent II. Institutional DeveloDment and Decentralization (US$61.1 million, or 13.8 percent oftotal Project costs). This component, implemented at a national scale, aimed at supporting thedecentralization of health service management from the SSA to the 32 state and health jurisdiction levels.At the state level, it would support the State Health Agencies (SHAs) in improving financial management,training managers, building information systems, improving procurement and inventory systems, andenhancing the overall quality of the health care delivery system. One subcomponent would prepare thestates for the decentralization of executive and financial management functions from the federal to the statelevel, and the transfer of operational responsibilities from the state to the health jurisdiction level. A secondsubcomponent, focusing on human resources development, would train 70 senior managers at the federaland state levels, provide general management training to 500 staff at the state and health jurisdiction levels,and train 1,000 staff in organizing and analyzing epidemiological information for the purposes of settinghealth priorities and allocating resources. It would also train technical staff at the state and jurisdictionlevels in hospital management, procurement and inventory control, epidemiological surveillance, andquality control measures of sanitary regulations. This training program aimed at training 2,000 staff fromthe state health services.

Component III. Modernization and Restructuring of the SSA (US$47.0 million, or 10.6 percent oftotal Project costs). The third component aimed to support the restructuring of the SSA, finance policy andoperational studies, assist the development of a national communication system, and support Projectadministration through central and state level Project Coordinating Units.

The first subcomponent on restructuring the SSA in a decentralized environment would assist in redefiningits mission, objectives and functions, in proposing a new organizational model, and in identifying trainingneeds. Training workshops, equipment, materials and 60 person months of technical assistance would befinanced. The second subcomponent would finance policy studies on optimizing the provision andutilization of health services, and support pilot testing of models supporting the modernization of the healthsector such as: purchasing services from the private sector, providing health care packages through thesocial insurance sector, and providing incentives to improve productivity and quality among public sectorhealth staff. The third subcomponent would support the development of a national communication system(REDSSA) and introduce new information systems through five modules: a national health servicesinformation system, a procurement and stock control system, an epidemiological surveillance system, ahospital management statistical system, and strengthen the sanitary regulation and quality control of foodand beverage processing businesses and the marketing of food products, beverages and medicines. TheProject would finance the purchase of computers and accessories needed for linking electronically thenational, state and health jurisdiction levels.

3.4 Revised Components:The Project's three components were not redefined or revised during implementation, although as describedabove, the Project's geographical coverage was expanded under the first component to include eight

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additional states (beyond the eleven included at Project appraisal). Loan proceeds were reallocated and theclosing date was extended by one year during the mid-term evaluation of the Project.

3.5 Quality at Entry:The Project was prepared before routine quality assessments were initiated, thus there is no QAG rating.However, for the purposes of this report, the Project's quality at entry is considered to be satisfactory. TheProject's development objectives and its three components were well aligned with the Government'sdevelopment agenda, the country's health sector strategy and its health sector reform program, with theBank Group's Country Assistance Strategy (CAS), and with the health policy issues identified by theProject preparation team.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The Project's overall performance is considered highly satisfactory. The Project successfully providedbasic health services to the poorest and more isolated rural communities in the country (according to thesocial and geographical targeting criteria used under the Project). Services were delivered to about 9million poor (90 percent of target), mostly indigenous and often non-Spanish speaking, in 19 states(compared to 11 states at appraisal), in areas of difficult geographic and cultural access. This is a feat notaccomplished in any Latin American country with similar sizable indigenous communities that live indispersed and mountainous rural areas. Because of the inclusion of an additional eight states, the Projectreached less than the target number of beneficiaries, but, as a result of the agreed selection criteria, didreach a greater number of needier beneficiaries in more remote, difficult to access areas. Decentralizing theresponsibility for service delivery to the state level triggered increases in the availability of counterpartfunding for the Project, both from the Federal Government and the participating states, which in turnallowed the hiring of additional personnel over and above the Project's expected financing arrangements.The additional federal-and state-level resources provided funding for additional investments and operationalexpenses, including additional field staff, which in turn permitted an expansion in the number and theintensity of health services.

The Project adopted a flexible design where the Government and the Bank agreed on the objectives and anestimated financial package without a straight-jacket definition of a five-year implementation blueprint. Theannual monitoring of Project performance, which fed into the process of setting subsequent years' targetsand budgets, provided flexibility for realistic implementation, as well as ownership, especially by theparticipating states.

The Project's exemplary implementation was recognized when it received the World Bank's "President'sAward for Excellence" in 2000. Its superior performance is also acknowledged by the Government ofMexico which stated in its comments (see Section 9) that" this loan is considered one of the best in Mexicodue to its impact and the quality of its implementation".

Improved access to basic healthcare. As noted above, at the beginning of Project implementation theProject's goals were adjusted, in accordance with the Government's 1995-2000 Health Sector ReformProgram, to support the SSA to improve the coverage of basic health services for 10.9 million poor withlimited or no access to health care. By 2001, the Project reached about nine million persons living in 19states, 878 municipalities, and more than 46,000 rural communities (expanding the original plan of 11states and 600 municipalities). It should be noted that the Project was implemented together with otherrelated programs financed with federal and state funding. In effect, all of these programs contributed toextending basic health service coverage to all the targeted 10.9 million poor, most of them in communities

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with fewer than 500 inhabitants. About 1.5 million of these beneficiaries live in small rural andmountainous hamlets that could only be reached by traveling health teams. The majority of these peoplesaw a professional health care worker and received health care services for the first time in their lives. Theintensity of the services provided increased dramatically, almost doubling the number of medical visits per1,000 people (Annex 1).

Institutional development and decentralization. The SSA was decentralized and the management ofhuman, physical and financial resources was shifted to the 32 federal entities. The operational capacity ofthe states was strengthened, additional staff was hired, personnel were trained in general managementfunctions and in specific functional areas such as inventory control, management information systems,epidemiological surveillance, and quality control. States assumed responsibility for service delivery,increased their share in the financing of operating expenses, and included the newly-hired health workers intheir regular payroll. Part of the goods financed by the Project were procured online using the federalelectronic COMPRANET system, that increased the efficiency and lowered the costs of procurement, andlater became a pilot intervention for procurement in other Bank-financed operations.

SSA modernization and restructuring. The SSA was the only federal secretariat decentralized during theZedillo Administration. 4/ The federal level divested itself of all operational responsibilities and redefinedits mission and role as one of policy making and stewardship. Three fourths of its budget is now passed onto the states. A pioneering and unique communication system (REDSSA) now transmits electronicallyvoice and data between the federal level, the 32 federal entities and the 231 health jurisdictions. Mexico isnow among the leaders in health communication and information systems in the Latin American region.Forty two operational and policy studies were also financed to guide policy making and health sectorreform. Operational studies supported the implementation of the first component (baseline and annualevaluations, mapping service delivery routes, improving the distribution of pharmaceuticals and supplies).Policy studies included an analysis of health policy changes, prepaid medicine, a national nutritionalsurvey, a feasibility study for privatizing the production and distribution of vaccines, and addressedspecific public health problems such as HIV/AIDS, intra family violence, and the use of insecticides andtoxic substances.

4.2 Outputs by components:

Component I. Basic Health Care Services (US$335.3 million, or 75.6 percent of total Project costs).ICR Rating: Highly Satisfactory. The Project met the organizational, logistic and health workforcechallenges to deliver basic health care services to a geographically dispersed, culturally, ethnically andlinguistically diverse population living in a larger number of localities than those originally estimated atProject appraisal. The Project defined the geographic areas where services would be organized, the criteriafor selection of the beneficiaries, what services would be provided and by whomn, and how services wouldbe delivered. Investment and work plans were adjusted annually based on a feedback from closemonitoring and annual evaluation studies. Participating jurisdictions prepared annual work and investmentplans according to established criteria - including state health priorities, epidemiological profiles, povertyindex, definition of beneficiaries, expected increases in efficiency and quality, costs, and available technicaland management capacity to implement the plan. Furthermore, the Project used a new process for timelyrelease and rapid flow of budgetary funds to the states and jurisdictions. A federal Advisory Committee,composed of representatives from the agencies directly involved in Project implementation, reviewed andapproved annual work and investment plans.

Geographic Area and Beneficiary Population. About 63 percent or 120,000 of the more than 200,000communities in Mexico have fewer than 100 inhabitants and 184,000 communities have fewer than 500

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inhabitants. The indigenous population of Mexico is estimated at 8.7 million according to the definitionused in the 2000 census; almost all are noninsured and five out of six reside in rural areas. The Projectorganized service delivery in 19 states, 100 health jurisdictions, 878 municipalities and reached 9 million,or about 90 percent of the 10.9 million target beneficiaries, living in 46,493 communities. Three quartersof the target population live in the six most economically deprived states: Chiapas, Veracruz, Oaxaca,Guerrero, Puebla and Hidalgo (see Table 2). The population in 41 percent of the municipalities isoverwhelmingly indigenous and a high percentage is non-Spanish speaking. Oaxaca alone has seventeenethnic groups with their own language.

The nine million actual Project beneficiaries were split about evenly between males (49.6 percent) andfemales (50.4 percent). Half of them were older than 20 years. The under-five age group accounted for13.1 percent, women in reproductive age (15-49 years old) for 24 percent, and women between the ages of25 and 64 for 18.6 percent. These numbers were used in the calculation of utilization rates for specifichealth interventions in Annex 1.

An epidemiological diagnosis prioritized the interventions to be included in the basic health care servicespackage. The 13 cost-effective interventions included in the package were the minimum number of servicesmade available to the dispersed, isolated and vulnerable rural population groups that were targeted by theProject. They included: injury prevention and emergency care; basic sanitation at the household andcommunity levels; diarrhea control; family planning; prevention and treatment of parasitic diseases; healthand nutrition information, education and communication; immunizations; prenatal care and child delivery;prevention and control of hypertension and diabetes mellitus; prevention and control of tuberculosis;nutrition surveillance; treatment of upper respiratory tract infections; and prevention and control of cervicalcancer. The epidemiological profile in some states required also additional interventions such as malariacontrol, dengue control, and cholera prevention.

How were services provided and by whom? The characteristics of some of the intended beneficiarypopulation severely limited the traditional approach of serving them from fixed facilities. A decision wasmade to organize and use Itinerant Health Teams (IHT) that covered a micro region of ten to fifteencommunities and was based in a health center serving up to 500 families. The team consisted of aphysician (often a recent medical school graduate), a nurse, a health promoter and, at times, a dentist.Three types of IHT exist: (i) an ambulatory brigade that visits an average of ten communities each monthon foot returning to its base about every eight days to rest and to prepare the next route; (ii) a mobile unitthat visits each month ten to fifteen communities by vehicle and returns to its base every ten days to restand prepare the next visit; and (iii) a mixed brigade that combines driving and walking to reach its assignedpopulation. In the first three years of the Project, about 60 percent of the IHT were of the mobile unit type.The second half of the Project witnessed an increase from 40 to about 60 percent in the use of ambulatoryand mixed brigades. Communities in many cases were hamlets of six to eight houses that could only bereached on foot. Mapping of service routes was greatly facilitated by a digitized cartographic systemfinanced under Component III (Modernization and Restructuring of SSA).

Community health workers supported the mobile teams at the local level. These workers were selected bythe community and worked out of a "Health House" (Casa de Salud) contributed by the community andequipped by the program. The IHT trained the auxiliary health worker in health promotion and preventionactivities and in early detection of common diseases to allow quick referral with the support of the localauthorities. Each community has an elected health committee for the purposes of participating in thediagnosis of health problems, prioritizing interventions and community projects, and promoting socialparticipation. Community leaders are involved in implementing and evaluating the program.

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By 2001, 5,128 new civil service positions were added that became-as mentioned in section 6.2 below-anintegral part of the regular civil service structure at the state level at the end of the Project. This measure,discussed and agreed between the Federal Finance and Health Secretariats, the participating State HealthSecretariats, and the Bank team after the mid-term review of the Project, is contributing to ensure the longterm sustainability of Project activities. Staff recruited for these new positions were physicians (30percent), nurses (30 percent), auxiliary nurses and health promoters (31 percent) and others (9 percent).The bulk (69 percent) of these new hires took place in the six poorest states (Table 3). Additionally, theProject successfully used incentive schemes to retain health personnel in hardship rural areas.

During the 1996-2001 period, a total of 10,870 community health workers operating in remote rural areaswere trained in the 19 states covered by the Project, and more than 15,000 community health committeeswere established. The strategy of using traveling health teams allowed the Project to reach 1.5 millionpeople who had never before had the benefit of receiving modem health services.

The remainder of the beneficiary population was less dispersed and was served through outreach programsbased in health centers and through visits to the health centers. The number of health centers used by theProject increased by 376 percent between 1996 and 2001 from 505 health centers to 2,404. Health centerswere responsible for the population in their area of influence and carried out this commitment by servingpatients coming to the center, by reaching out into the communities visiting homes, and by serving as astaging ground for the itinerant health teams that visited the most dispersed population. Community mapsidentified each house and color codes indicated the presence of at risk patients such as pregnant women,diabetic and hypertensive patients, or malnourished children. Teams made regular house visits, oftenassisted by members of the local health committee, to identify other persons at risk.

Mobile units increased 390 percent from 125 to 613 under the Project; foot brigades more than doubledfrom 82 to 181; and 595 mixed brigades combined driving and walking. Another interesting Project featurewas the role of Health Auxiliaries, who are the primary health providers in rural communities. Theseauxiliary personnel were selected by and work in their own communities.

The establishment of community health committees facilitated the provision of services, the acceptance ofand the demand of indigenous people for the interventions included in the basic package of health services,ensured health workers' safety in distant and dangerous areas, and contributed to the sustainability ofProject activities in the medium and long terms. To promote community participation, emphasis wasplaced on: (i) promoting the acceptance and informed participation of communities, local authorities andstakeholders in social development and well-being; (ii) promoting the modification of practices and livingconditions to prevent illness and death and improve individual and community health; (iii) strengthening theknowledge and skills of medical and nursing personnel and community health workers in the tasks of healthpromotion and education; and (iv) promoting community participation in planning efforts, Projectimplementation, resource use, and collective assessment of Project implementation and impact.

The above activities were carried out with respect to the culture, beliefs and customs of each community, inclose cooperation with the community assembly, local leaders, and traditional authorities.

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Table 1: Absolute and Relative Population Coverage by PAC Program 1996-2001

Federal Entity 1996 -PAC 2001 PAC 2000 SSA % 2001 PACBeneficiaries Beneficianres, Change Population Ben/2000 SSA

Population

Chiapas 1 853400 1613300 89 1730000 93.2Veracruz 134100 1501300 1019 2150500 69.8Oaxaca 1 964200 1118800 16 1670000 67.0Guerrero 1 785100 940500 20 2557000 36.8Puebla 253400 802200 216 1864000 43.0Hidalgo 1 262300 748000 185 1180500 63.4Total six poorest 3252500 6724100 107 11152000 60.3states,' 107 111.200 60.Other thirteen PAC 625600 2252400 260 17162000 13.1States _Total PAC 3878100 8976500 131Beneficiaries

Total SSA Pop. 28314000 31.7PAC StatesTotal SSA Pop. 13567500Non-PAC StatesNational SSA 41881500PopulationTotal National 100291968Population 2000% SSA Pop 41.8%/National Pop.I States included in PAC I projectSources: SSA/DGIED; SSA Anuarios Estadisticos 1990-2000

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Table 2. Geographic Coverage of PAC Program 2001

Federal No. of Health - No. of -'No. of Pop.. -No .. IiH (*) No. HIT IHT No. HealthEntity Jufisdictions - Municipalities Communities - seried; Mobile Foot 'Mixed Centers

. . .- - , . - ; . ;. Unites BrigadesCampeche 3 3 344 47600 12 10Chiapas 10 77 10500 1613300 62 163 - 219Chihuahua 8 21 4226 183300 46 - 120 69Durango 3 8 1970 85800 25 - - 21Guanajuato 1 6 442 63500 16 - 26Guerrero 6 40 2512 940500 47 - - 408Hidalgo 10 52 2110 748000 . - 214 273Jalisco 7 15 933 46100 32 2 - 5Mexico 4 19 1686 779200 21 4 211Michoacan 4 13 2178 118700 28 - - 30Nayarit 2 2 407 34300 11 - 6 6Oaxaca 6 317 2605 1118800 107 2 255 347Puebla 9 94 243S 802200 10 - - 210Queretaro 2 5 576 96500 20 2 - 46SanLuis 5 18 1920 252400 58 1 - 55PotosiSinaloa 5 7 2028 215300 23 - - 60Veracruz 9 135 7823 1S01300 58 7 - 331Yucatan 3 39 1342 230800 17 - - 57Zacatecas 3 7 456 98900 20 - - 20

Total 100 878 46493 8976500 613 181 595 2404Six economically less developed states in italics(*) IHT= Itmnerant Health Teams

Symbiotic Relationship with PROGRESA. At the local level, the Project coordinated and integrated itsservices with other national programs that aimed to expand social services, but especially with theanti-poverty Education, Health and Nutrition Program (PROGRESA). PROGRESA combines atraditional cash transfer program with financial incentives for families to invest in human capital ofchildren. In order to receive the cash transfer, families must obtain preventive health care, participate ingrowth monitoring and nutrition supplements programs, and attend education programs about health andhygiene. The health and nutrition services required by families in order to qualify for PROGRESA cashtransfers were provided by the Project (i.e. the PAC - Programa de Ampliacion de Cobertura) in allProject municipalities. In addition, the Project was instrumental in coordinating and integrating at thelocal level with other related programs such as the Health Care for Indigenous Zones (PAZI), IntersectoralProgram for Peasant Workers (PIAJA), and Ambulatory Surgery Program (PCE), among others.

What results were achieved by the services provided? Annex 1 presents a set of measures that indicatechanges in health status of the Project's beneficiaries. Annex 1 groups output indicators showing advancesmade in delivering services contained in the basic health services package, focusing on the six pooreststates with the highest coverage. No causal relationship with improved health conditions is posited, but it iscommonly accepted that the progress shown in immunizing, diagnosing and treating patients will result inbetter health. Comparisons are made between the rates for 1998 and 2001, since data for years prior to1998 at the jurisdictional and state level show inconsistencies and large year-to-year variations. Thereliability and consistency of data collected at the medical service delivery unit in the municipalities as of1998 did improve somewhat, but the reproductive health indicators (use of family planning, prenatal visitsand deliveries attended professionally in health facilities) lack reliability and could not be retained. Projectresults show that child health shows a strong increase in nutritional control and higher treatment rates forchildren with infectious diarrheal and acute respiratory diseases. Also, complete vaccination rates wereachieved in 97 percent of the municipalities for children under the age of one and in all municipalities forchildren between the ages of one and four.

Outcome indicators in Annex 1 suggest that the Project played an important part in reducing maternalmortality, increasing life expectancy at birth, and decreasing fertility. These favorable results bring thepoorest states closer to the national averages, but cannot be attributed solely to the Project as other socialprograms and changes in general economic conditions also contribute to improved health conditions.

The Project outcomes described above are consistent with the impact evaluation of PROGRESA on thehealth status of the poor population served by both programs. Taking advantage of a controlledrandomized study design with household panel data, Paul J. Gertler, UC-Berkeley and National Bureau ofEconomic Research, and Simone Boyce, UC-Berkeley 5/ found significant utilization of public healthclinics for preventive care, lowered number of inpatient hospitalizations and visits to private providers,reflecting lowered incidence of severe illnesses. The research also found a significant improvement in thehealth of both children and adults.

How equitable was the Project? The percentage of Project expenditures as a share of total publicexpenditures for health at the state level is small. The average Project expenditure over the 1996-2001period ranges from a high of 3.8 percent of the state health budget in Oaxaca to a low of 0.1 percent inJalisco. The four states in the Project that had the higher shares of state spending on health from theProject were also the poorest states (Oaxaca, Chiapas, Guerrero, Puebla). However these four states hadalso a higher percentage of their population enrolled in the Project. Because of this larger enrollment, theaverage amount of Project money spent per user is the lowest of all 19 states. Conversely, states with asmaller number of users show Project expenditures per beneficiary that are three to four times higher thanin the poorest states.

ComDonent II. Institutional Development and Decentralization (US$61.1 million, or 13.8 percent oftotal costs). ICR Rating: Satisfactory. The authority for providing health services to the uninsuredpopulation has been decentralized to the 32 federal entities (31 states and the Federal District). By decree,32 Decentralized Public Institutions (OPD in Spanish) were created and, as legal entities, have assumed thefiduciary responsibility for the decentralized human, financial and material resources together with theauthority to manage the primary and secondary levels of health care delivery. The federal level SSA retainsthe authority to regulate the sector and to set and coordinate national health policy. Policy setting isachieved mainly consensually through the National Health Council presided by the Minister of Health inwhich all 32 states are represented and which meets every two months. SSA remains responsible for thenational Health Institutes and the national tertiary care referral hospitals, but these institutions have beendecentralized and have a large degree of autonomy in their decision making.

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The state-level OPDs are run by Boards of Directors chaired by the State Governor. Their membershipincludes the State's Secretary of Health and representatives of the federal SSA, of the national union, ofuniversities and of civil society. The Executive Director of the OPD is the State's Secretary of Health whocoordinates all state health programs and implements national health policies and who is also a member ofthe National Health Council. Program implementation has been vested in the health jurisdictions as thetechnical institution responsible for managing the primary and secondary levels of health care delivery. Atotal of 231 health jurisdictions were created and their number per state varies with population density andgeographic extension.

The SSA was the only federal secretariat decentralized during the Zedillo Administration. 6/ SSA nowtransfers 76 percent of its budget to the states, retains seven percent for its own operations and finances thenational hospitals and specialty institutes from the balance.

The Project contributed to the Mexican Government's far-ranging decentralization achievements in thehealth sector by supporting and/or financing decentralization proposals. Project financing also supportedthe institutional strengthening of state health secretariats and health jurisdictions. The development ofmicro-regional planning approaches and methodologies, including geo-referenced and digital mappingsystems, has created inter-institutional coordination mechanisms with the potential to optimize theorganization of health care delivery networks.

Human Resources Development. New staff was recruited and trained to achieve the proposed coveragetargets. The Project contracted 1,552 physicians and 1,538 nurses. Another 2,038 support staff (dentists,heath promoters, drivers, computer specialists and data analysts, etc) were added (Table 3). The states thatadded the largest numbers of staff were the six poorest states (also the state of Mexico) and this effort isreflected in the high coverage rates shown in Table 1. Almost all training activities were financed bynational funds outside the Project's financial arrangements. This was especially the case for training inmanagement tasks and functions, informatics, and supply and logistics management where staff andresources from the central level were used. Service delivery personnel and support staff received trainingthrough the state level OPDs. These institutions organized training workshops for planning, sharing theplans, budgeting, monitoring and evaluation at the different administrative levels within the states.

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Table 3. Human Resources Added 2001

Federal Physicians Nurses Other Non- Total'Entity Health Staff Health

._____ ¢ s -. ,' _ Sup Staff

Campeche 19 18 20 5 62Chiapas 90 76 184 45 395Chihuahua 47 35 178 25 285Durango 30 38 22 9 99Guanajuato 21 24 36 2 83Guerrero 108 103 67 29 307Hidalgo 207 168 90 35 500Jalisco 35 22 34 7 98M6xico 94 129 38 33 294Michoacan 65 31 40 10 146Nayarit 21 18 19 26 84Oaxaca 107 344 103 46 600Puebla 226 186 267 56 735Queretaro 48 19 30 9 106San Luis 90 43 97 10 240PotosiSial oa 34 36 29 28 127Veracruz 207 184 266 40 697Yucatin 51 47 55 9 162Zacatecas 52 17 29 10 108

Total 1552 1538 1604 434 5128% of total 30.3% 30% 31.3% 8.4% 100%

Six economically less developed states in italics

ComDonent m. Modernization and Restructuring of the SSA (US$47.0 million or 10.6 percent of totalProject costs). ICR Rating: Satisfactory.

The decentralization of SSA was described in the previous component. The transfer of human andfinancial resources to the state level required a redefinition of the role, mission and functions of the centrallevel, and a restructuring of its activities. This process was successfully started under the Project and isbeing carried forward under the present Administration.

The communication capacity among SSA units was very limited in 1995. As a result, the process ofrestructuring and modernizing SSA could not have been carried out without having available a majorcommunication support framework that allows a free flow of data and messages that take place among allactors. The national communication network is a major achievement under the Project. A phasedapproach installed, over a six year period, a communication network-named REDSSA-that usedLAN/WAN for voice and data and that interconnected the 32 federal entities and the 231 health districts.The technology platform includes 2,600 connection points with 2,750 mailboxes for data exchange and1,000 electronic mail boxes, Internet and Intranet, a virtual health sciences library, chat sessions, and audioconferences. Stand alone applications that use the network are Open Population Health InformationSystem (SISPA), Epidemiological Surveillance System (SUIVE), Hospital Discharge System, UniversalVaccination Program, Inventory of Health Infrastructure, Human Resources data base, a register formedical residencies, and other communication and information applications. The network supported the

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Project's use of the national COMPRANET system for online purchasing of goods. The GeneralDirectorate of Statistics and Informatics carried out the development of REDSSA in house. Availability ofloan financing helped in meeting deadlines and delivering the fmnal product on time.

About 1.6 percent of the loan was disbursed for financing the cost of forty two policy and operationalstudies in support of the service delivery component and for the purpose of examining and defining newhealth sector policies and reform initiatives. These studies fall into three categories:

(a) Support for Implementing Basic Health Care Services (Component I): digital mapping forplanning service delivery routes, baseline diagnostic studies, annual evaluations, mid term andimpact evaluations, programming and budgeting at the first level of care, nutritional supplementsfor pregnant women and children less than two years old, measuring and improving access;

(b) Quality Improvement studies that monitored the quality of services provided and measured usersatisfaction;

(c) Specific policy studies. The largest policy study, a national nutrition survey, accounted for almostone fourth of the budget. Its recommendations have led to and buttress the Government's nutritionpolicies and programs. Other policy studies included those on: the regulation of prepaid medicine;an autonomous company for producing and stockpiling biological products; domestic violence andwith HIV/AIDS; hospital supply systems; innovative methodologies and procedures for planning,programming, budgeting and evaluating health care; hospital technological infrastructure; theeffectiveness of the Intersectoral Committee controlling the process and use of insecticides,fertilizers and toxic substances; and the Y2K conversion.

4.3 Net Present Value/Economic rate of return:N/A See Annex 3.

4.4 Financial rate of return:N/A

4.5 Institutional development impact:The Project's Institutional Development impact is considered high. The impact on health institutions isevident from the description of the outputs of the three components in Section 4.2 above. The Projectprovided convincing evidence of the success of a health services delivery model that specifies what servicesto provide, to whom, by whom, how, when and where. Evidence from the mid-term and Project closingevaluations supported the Project's technical sustainability, as the strategy adopted by the SSA to expandhealth services coverage for the poor has proven to be a cost-effective way to reach dispersed population inremote rural locations that may be replicated in other countries with similar demographic and socialcharacteristics. (Indeed, with Bank support, a high level delegation from Turkey visited Mexico in 2001 tolearn about the Project supported strategies and to discuss ways to replicate them under a proposedBank-financed Project in that country). The service delivery model has been adopted and improved by theFox Administration to expand the methodology to urban poverty areas under the follow up Bank-financedPROCEDES Project.

The authority for providing health services has been effectively decentralized from the federal level to thestates. It is difficult to imagine that decentralized human and financial resources could be recentralized, asdecentralized units were created at the state level and the central level was restructured. The nationalcommunication network for voice and data was created and is a landmark development greatly facilitatingand speeding up all forms of communication among the different government levels. It is now also usedextensively for electronic purchasing of goods and services. A large number of staff from various

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organizational levels have been trained and are applying the acquired skills. All these achievements havepositively affected and will continue to influence the delivery of health care services to the poorer segmentsof the Mexican population, particularly those residing in dispersed rural communities with a highconcentration of indigenous population groups, and in marginal urban areas.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:No major external factors occurred that would have affected the Project's outcome. However, at the onsetof Project implementation, the country was facing an economic and financial crisis triggered by the pesodevaluation in late December 1994, that delayed the allocation of required counterpart funds. Nevertheless,given the priority assigned by the Government to the Project in view of its poverty alleviation focus, thebudgetary allocations for the Project were protected throughout this period.

5.2 Factors generally subject to government control:The political calendar in Mexico is defined by Presidential elections every six years with no second term forincumbents. Activities tend to be slower during the first and last years of the sexennial cycle whenpreparing for or jumpstarting a new administration. Indeed, support for implementation from the centrallevel was highest during the years of 1996-99. Project implementation, however, did not suffer from thechanges in administration and the Project was largely implemented as planned. Preparation was initiatedunder the Salinas administration (1994), implementation was carried out under the Zedillo administration(1994-2000), and Project closure occurred under the Fox administration in 2002.

5.3 Factors generally subject to implementing agency control:The Federal Secretariat of Health (SSA) and the State Health Authorities (SHA) in the participating stateswere the implementing agencies. SSA defined and steered this poverty reduction program as an integralpart of national social policies and decentralized its implementation to the participating states.Decentralization of financial and human resources was a key ingredient for successful implementationbecause it vested ownership and accountability in the states. Annual investment and work plans weredefined by the states, flexibility was allowed and encouraged, supervision and monitoring kept the programon course. Performance data were used for budgeting purposes, once the management information systemswere running smoothly by the end of the second year. Incentive payments for service in hardship areashelped staff the Itinerant Health Teams and reduced turnover.

5.4 Costs andfinancing:At appraisal, the total Project costs were estimated at US$443.4 million. These were to be financed by aBank loan of US$310 million and a Federal Government contribution of US$133.4 million. Reflecting thehigh priority attached to the Project over the implementation period, the Federal Government allocated anadditional US$115.4 million to finance Project-related activities, both at the national and state levels (overand above the agreed Bank-Govermment financial sharing arrangements in the Loan Agreement). The StaffAppraisal Report had posited a state contribution of at least 10 percent outside the Project's financialarrangements in order to promote sustainability. The states in most cases contributed resources well abovethis required amount as increased state and municipal resources for health became available through theRamo 33's intergovernmental allocation mechanism. This mechanism facilitated the transfer of financialresponsibilities from the federal SSA to state and municipal entities (the disbursement of Ramo 33 funds isa relatively automatic process, as the Federal Treasury sends to the States the funds on a monthly basis;once funds are disbursed from the federal budget, these become part of the state budget). During the1996-2001 period, US$80.1 million were allocated by participating states to help finance additionalProject-related activities outside the Project's financing plan. Community contributions were estimated atUS$4-5 million in the same period. In sum, during the Project period, a total of about US$639 million

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were spent for Project activities in the 19 states from all sources of funds, including the Bank loan.

6. Sustainability

6.1 Rationale for sustainability rating:The Project's sustainability is highly likely on several grounds, as described below.

Technical Sustainability. The Project's service delivery methodology has clearly proven that it is possibleto provide basic health care services to a disenfranchised, geographically dispersed, and ethnically andlinguistically diverse population residing in remote rural areas. The careful annual operational andinvestment planning, performance budgeting, the supportive implementation environment and the closemonitoring of results were Project practices that continue to be followed after Project completion. Thecommunication network REDSSA, has been installed and effectively links the federal level, the state leveland the health jurisdictions for voice and data. The requisite number of staff to operate the network hasbeen trained and is operational.

Financial Sustainability. Providing social services on a regular and sustained basis to the poorest stratumof the population in any country requires multiple sources of finance. Central and local governments inalmost all countries subsidize health services for the poor. Financial sustainability of programs intended toreduce extreme poverty therefore depends on the country's willingness and ability to improve the lot of thepoorest segment of its citizens. In the case of this Project, the Government of Mexico amply demonstratedits willingness and ability to finance Project activities. The federal Secretariat of Finance, SSA and theState Health Secretariats agreed on increasing the Govermnent contribution for operating expenditures.Bank supervision missions supported these tripartite dialogues. Furthermore, the number of staff (5,128)added by the end of the Project as shown in Table 3 are now all contracted by the states thus guaranteeing asustainable presence to continue providing services to the poor.

Additionally, as evidenced by the experience of developed countries, financial support must be earmarkedfor the poverty reduction programs to ensure that funds achieve the stated policy objectives. Under thisProject, the federal government earmarked resources to finance a basic package of cost-effective serviceand a methodology to deliver the services (following the Bank's 1993 WDR recommendations), carefullydefined the targeted population selecting municipalities with high and very high poverty ratings,decentralized implementation to the states, and financed the program jointly with the states. Not earmarkingthe funds would entail a risk of having funds for poverty reduction diverted to procure inputs forpopulation groups that are politically more attractive and have voice. Fungibility of funds can shortchangethe poor because of political pressures to use the funds elsewhere.

Although they were financially insignificant and were used more for accountability purposes than forfinancial sustainability reasons, some user fees were collected under this Project. The financialcontribution of the central government to financing this Project decreased from 94 percent in 1996 to 82percent in the year 2000. States paid the balance: 6 percent in 1996 and 18 percent in 2000. Federal andstate governments will continue their financial support to achieve equity in health services for the poorest,as Project activities have now been incorporated as part of the regular programs supported by the StateHealth Secretariats and financed with regular budgetary allocations. Bank financing for a follow-upProject, the PROCEDES Project was approved in June 2001. PROCEDES is being implemented with thegoal of expanding the coverage of basic health services to population groups residing in marginal urbanareas.

Political Sustainability. The SSA was decentralized, it redefined its mission and role as one of policy

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making and stewardship and shifted the management of human, physical and financial resources to the 32federal entities. This is a fait accompli and it is highly unlikely that this divestiture of authority will bereversed.

6.2 Transition arrangement to regular operations:Planning, budgeting and service delivery functions were transferred to the states and have become anintegral part of the 32 Decentralized Public Organizations (OPDs) in 31 states and the Federal District.The Project created and filled 5,128 positions for health personnel. These positions are now part of theregular payroll and staff have contracts that are guaranteed for ten years. The additional personnel havenow been unionized. The functions of local Project implementation units (UEPs) have been integrated inthe state health services. Management information systems in the state health secretariats and the healthjurisdictions have contributed to strengthening the managerial capacity of OPDs.

7. Bank and Borrower Performance

Bank7.1 Lending:ICR Rating: Satisfactory. The scope of this Project was first discussed with the GOM in January 1994.The loan became effective in March 1996. What happened during this 27-month period? The Project cycleand its corresponding Bank missions moved quite swiftly in 1994: Project identification in April, Projectpreparation in May, a workshop with participating states in June, a second preparation mission in July,pre-appraisal in October, and Appraisal in November. Warning signs appeared first in the recordings ofthe July mission when "no substantial progress" and a "paralysis" at the central SSA level was reporteddue to the upcoming August 22, 1994 elections. During the pre-appraisal mission in October it was agreedthat negotiations would be conducted with the new administration that was taking office on December 1,1994 and a post-appraisal mission was scheduled for February 1995. The appraisal mission took place inNovember, three weeks before the change over from the Salinas government to the Zedillo government, butwith participation of the transition team.

The originally budgeted US$10 million seed money to start up the Project in CY95 was cut from the budgetby the incoming government . The post-appraisal mission that took place in February 1995 agreed on theloan amount, the Staff Appraisal Report was issued in August 1995, followed by Board approval inSeptember 1995 and loan signing in October 1995. It then took the GOM five months to meet theconditions of effectiveness, during which time two Bank missions visited the country to follow up.

Two slack periods slowed the Project cycle: one of nine months between appraisal and SAR approval forlack of start up counterpart funds and one for five months to meet loan effectiveness conditions. The Bankprovided full support by fielding eight missions during the 27 month period January 1994 - March 1996and by assuring continuity in its staffing of the missions. The change in Government in December 1994was predictable, but its impact on the timeline for processing the investment loan was not.

Building upon the lessons learned during the implementation of the First Basic Health Care Project, theBank team worked closely with the Government in building a flexible design which permitted the definitionof the Project's geographical coverage in accordance with well defined targeting criteria and theprogrammatic priorities of an incoming Government. As such, the Project supported the development of atargeting mechanism for the delivery of a cost-effective basic health care package to the mostdisadvantaged communities within a poor state. In addition, the Bank's team helped design strategies tobuild ownership in the states by promoting the involvement of political stakeholders, particularly the StateGovernors, to guarantee continue support for the Project, foster ownership and sustainability. The Bank'steam also supported the design of highly participatory mechanisms that allowed state and municipal

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governments and communities to play an important role in the preparation and implementation of theannual investment plans that were financed under the Project. In addition, with Bank' support and incoordination with the IDB and PAHO/WHO teams, a health sector study was initiated by the departingSalinas Administration that helped to pave the way for the definition of sector policies and priorities in theincoming Zedillo Administration.

7.2 Supervision:ICR Rating: Highly Satisfactory. Two Bank missions per year supervised Project implementation duringthe first five years followed by three videoconferences during the final one year and a half of Projectexecution. During Project implementation, the Bank's teamwork reflected a well balanced and effectiveteaming of support, legal, procurement, and disbursement staff, both at Headquarters and in the CountryOffice, as well as of specialized consultants. Also, the work of the core Task Team at LCSHD benefitedfrom participation of YPs and PREM staff. The first three supervision missions were led by the originalTask Team Leader (TTL), followed by a new TITL for two missions and a third TTL took over for the finalfour Project years. The discontinuity in Bank task managers did not affect the quality of the supervisionprocess or the accountability for results. A mid-term evaluation was conducted in April 1999. The switchto a videoconference format during the last eighteen months, in conjunction with regular support andassistance provided by the task team members located at the decentralized Country Department in MexicoCity (e.g., Sector Leader, Procurement and Financial Management Specialists, Operational Officers) havebeen cost-effective, as the Project was performing well once the new Government team was fully in controland it became clear that the original objectives were being met.

Bank supervision missions worked well at both the federal and state levels with staff of the Federal Healthand Finance Secretariats, NAFIN, and state and local officials in reviewing Project achievements during theimplementation period, planned budgets and investments plans. The Bank's team placed particularemphasis on assessing indicators and benchmarks to monitor Project progress during field visits andprovided technical assistance for fine tuning the strategies and mechanisms to expand the coverage of basichealth services and to support the states and the health services levels in assuming functions andresponsibilities as decentralization progressed. In addition, the Bank's team was a conduit for exchange ofintemational experience and exposure to best practices, providing the country counterpart team with accessto relevant international experience in health sector development, and served as a link to allow thecoordination of Project implementation with activities supported under other Bank-financed operations inthe country (e.g., the Health System Reform Technical Assistance and Structural Adjustment Loans forIMSS, the Decentralization Adjustment Loan (DAL), and the State of Mexico Adjustment Loan).Moreover, the Bank's team facilitated the dissemination of project-related experiences in international fora(e.g., EuroLac conferences held in Barcelona, Paris, San Jose, and Malaga) and exchanges with othercountry team embarked in similar processes (e.g., visits to Mexico by delegations from Turkey, Bolivia,Brazil, Peru, Costa Rica).

As part of its supervision activities, Bank staff supported SSA in a pilot agreed with the Government ofMexico for trying out the electronic procurement of goods using the country's internet websiteCOMPRANET, the first for a Bank-financed Project (now this mechanism has been replicated in othercountries). As evidenced in a recent evaluation of this mechanism, the net impact of COMPRANET wasvery positive in that it reduced collusion of suppliers, led to cost reduction in bidding processes andsignificant compression in the procurement timetable for goods and services.

Overall, the Bank team was recognized by the Government and by Bank management for itsprofessionalism and responsiveness as well as for its understanding and respect of Mexico's policies andprograms. Also, the Bank team worked closely and effectively with the Government teams in identifying

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solutions to Project implementation bottlenecks, particularly after the mid-term evaluation, ensuring in thisway the long-term sustainability of Project activities (e.g. after the mid-term review of the Project, theBank team helped the Government to develop an action plan for the adoption of measures to ensure theinstitutional and financial sustainability of Project activities at the state level; adjustments were also made,with the Bank Board's approval, to the Project's financing plan to better reflect the economic changes inthe country as well as the expanded scope of the Project). As noted below, the comments of theGovernment of Mexico (See Section 9) single out the quality, consistency and professionalism of the Banksupervision missions.

7.3 Overall Bankperformance:ICR Rating: Highly Satisfactory. As noted above, and as recognized by the Government, the Bank'steam was a supportive partner during Project preparation and implementation, providing technicalassistance and bringing international experience to bear, particularly for ensuring the technical,institutional, financial, and political sustainability of Project activities in the medium and long term anddeveloping follow-up policy and institutional reforms to be supported under the PROCEDES Project.Considering the complexity of supervising this operation and providing technical advice to a sophisticatedBank partner, the higher ICR rating for supervision (vs. preparation) was considered appropriate foroverall Bank performance.

Borrower7.4 Preparation:ICR Rating: Satisfactory. Project preparation started in 1994 with national Presidential electionsscheduled for August 1994 and the change of administration in December 1994. Preparation slowed inJuly 1994 and the pace quickened again in March 1995 once the new administration was firmly in place.The new administration retained some staff of the previous administration enabling a quick restart of thepreparation and negotiation process. Loan signature followed then in October 1995.

In response to Mexico's demographic conditions characterized by a great population dispersion in ruralareas, (151,000 communities have less than 100 inhabitants), the Project developed a flexible andinnovative strategy to reach the 10 million people who did not have access to basic health care. The BasicHealth Services Package was designed following the recommendations of the Bank's 1993 WorldDevelopment Report as a universal, minimum, irreducible set of low-cost, high-impact health interventionsto address the main health needs in rural areas identified through a national epidemiological survey. It isalso applied, in a flexible manner, in each state according to local conditions, combining preventive andtreatment-related activities.

Overall, the country team incorporated the lessons learned during the First Basic Health Care Project anddesigned a Project that was routed on solid technical principles and methodologies, as well as on results offield experiences. The Government recognized early in the preparation stage of the Project thatdecentralization of services was crucial to reach the underserved population and incorporated this as themain pillar of the health sector reform program. In addition, the continuity of policies and reform initiativesin spite of the political changes in Government ensured that well designed programs such as the Projectwere affected or distorted.

In spite of the above innovations, Borrower performance at preparation stage was considered satisfactory(instead of highly satisfactory) because of the delays suffered during the electoral period, as well as by theinitial uncertainty in counterpart funding between appraisal and project approval (see para. 7.6). Theseissues were resolved at the initial year of Project implementation.

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7.5 Government implementation performance:ICR Rating: Highly Satisfactory. The high level of government commitment, country ownership andpolitical visibility of the Project were key for the outstanding Project implementation performance. Thesefactors were clearly evidenced by the adequate provision of counterpart funding in spite of economicdownturn at the beginning of Project implementation, as well as by the allocation of additional federal andstate resources outside the Project's financial plan that contributed to expand the geographical coverageand the scope of Project activities. The Government's very strong commitment to decentralization wasperhaps the most important factor that facilitated Project implementation and achievements. Withoutdecentralization of authority and resources it would not have been possible to reach the number ofbeneficiaries that were eventually covered under the Project.

7.6 Implementing Agency:ICR Rating: Highly Satisfactory. The government - SSA, SHCP, NAFIN - assigned top priority to theProject as an important instrument for poverty alleviation, as reflected in significant increases in health careexpenditures. In turn, the Decentralized Public Organizations (OPDs) in each participating state werehighly instrumental in the success of the Project, both in the guiding the preparation of annual investmentsplans and in implementing Project activities.

Extemal financial audits confirmed the appropriate use and application of loan funds, as well as thesatisfactory implementation of the audit recommendations. Review of procurement processes carried outduring Project implementation showed satisfactory results. Legal covenants were respected andimplemented.

7.7 Overall Borrower performance:ICR Rating: Highly Satisfactory. The Project was a fully-owned Mexican Govermment program, towhich the Bank contributed financing and technical advice. The Government "being in the driver seat" wasa key ingredient for its success. The commitment demonstrated by the Government to reducing the burdenof disease among the poorest population in the country, and to modernize health care organization andfinancing was noteworthy. This has led to significant improvements in the health status of about 9 millionuninsured people through the implementation of a cost-effective basic health care package. TheGovernment, by transferring more programming, managing and budgeting responsibilities to states andjurisdictions, has promoted improvements in the efficiency and equity of resource allocation, quality ofservice delivery and institutional capacity of states and jurisdictions. The decision to modernize the SSAhas allowed it to resume its leadership function in the sector.

8. Lessons Learned

What are the key factors that explain the successful implementation of this project?

Government ownership is key. In this Project, the Bank's role was mostly supportive, as commitment toProject objectives was firmly entrenched in the Government's development program. Objectives were setby the country and the Bank's flexible approach allowed timely achievement of development objectives.Only in assisting in the definition of policy studies did the Bank take a more active stance.

Responsible risk-taking by the Bank and the Borrower. This Project was a traditional investment loaninfused with an adaptable lending spirit. The Bank agreed on a financial package but not on a five-yearblueprint detailing how to spend the money. It appraised the first year's activities and participated in theannual planning, performance budgeting and evaluation process. Flexibility of design allowed the Projectto adapt and change to the needs of the participating states, especially when highly-dispersed population

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groups need to be reached. In tum, the Bank's flexibility and limited control allowed the Borrower to takerisks and to learn while doing. Annual monitoring and evaluation of the Project carried out by an externalfirm served as an important mechanism to provide inputs to the planning of the following year's program ofcoverage and activities.

Political commitment contributed to a highly successful outcome. The country was politicallycommitted to raising the health status of the poorest, to decentralize health services delivery and tomodernize its operations for serving the uninsured population better. Project performance was prominentlymentioned each year in the President's State of the Union address. Progress was reviewed and discussed inweekly meetings with the Under Secretary of Health and in monthly meetings with the Federal HealthSecretary. It was also recognized that reaching the poor in highly dispersed geographical locations requiressubstantial amount of resources. The Mexican Government (federal and state) made a decision to financewhat it takes to provide a basic package of health care services to the hard-to-reach population residing inrural areas of the country, thereby allocating an additional US$200 million to the Project over and above itsoriginal financial plan as defined in the Loan Agreement.

Consistency of strategic approaches to reach the poor. The "symbiotic relationship" of the Project andPROGRESA proved to be a highly effective mechanism to achieve the Government's priorities in the healthsector while using the comparative advantage of each program. While the Project strengthened the supplyof basic health services, PROGRESA combined a traditional cash transfer program with financialincentives for families to invest in human capital of children. In order to receive the cash transfer, familiesmust obtain health care (provided by the Project), participate in growth monitoring and nutritionsupplements programs, and attend education programs about health and hygiene.

Managed Decentralization. Decentralizing the management of human, physical and financial resources tothe 32 federal entities and having states compete for resources may hurt the weaker states unless centrallevel technical assistance aggressively supports the economically lesser developed federal entities. Equitymust walk a fine line between letting go and being directive.

The Project's components were mutually supportive, and it is unlikely that the basic health carecomponent would have been as successful without similar progress in the implementation of theProject's other two components (Decentralization of Responsibility for Health Services, and theModernizing and Restructuring of SSA). The Government's full commitment to decentralizationof health services, and to redefining and improving SSA's policy-making roles and stewardshiprole within a decentralized context were fundamental for the Government's ability to providesuccessfillly basic health care services in dispersed rural areas.

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Endnotes

1/ OMS 1.21 indicates that recurrent costs should be financed on a declining percentage basis during aProject implementation period for the purpose of encouraging the necessary transition to eventual fullcounterpart coverage of operational expenses. This rule was observed in the original loan allocation wherethe financing share of 86 percent, 66 percent and 33 percent was applied at the time of mid-termevaluation.

2/ Recurrent costs refer to expenditures for medicines, consumable medical supplies, incremental staff,and other operating costs.

3/ The CONAPO poverty index ranked states, jurisdictions and municipalities based on results of"principal components analysis," using the 1990 NEGI census. This ranking took the following variablesinto account: population density, illiteracy in population >15 years, population >15 years without primaryschooling, availability of basic sanitation services, percent of households without electricity, availability ofdrinking water, percent of overcrowded households, percent of households with dirt floor, percent ofpopulation in localities of fewer than 5,000 inhabitants, per capita income of less than two minimumsalaries, and presence of indigenous population.

4/ The Education Secretariat had previously been decentralized--except for the Federal District educationsector--during the previous Salinas Administration.

5/ For additional data see "An Experiment in Incentive-Based Welfare: The Impact of PROGESA onHealth in Mexico", by Paul J. Gertler, UC-Berkeley and NBER and Simone Boyce, UC-Berkeley, April,2002, available online as PDF [29p.] at http://www.worldbanklorg/research/Proiects/service delivery/paper gertlerl.pdfl.

6/ The Education Secretariat had previously been decentralized--except for the Federal District educationsector--during the previous Salinas Administration.

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9. Partner Comments

(a) Borrower/implementing agency:

I. Comments from the National Financing Agency (NAFIN)

Below is an unofficial translation of the comments received from the Borrower.The Borrower's original comments in Spanish are presented in Annex 7.

Unofficial Translation

Loan 3943-MESecond Basic Health Care Project

Comments on the Implementation Completion ReportNacional Financiera, S.A.

This operation for US$310 million, in which NAFIN acted as Borrower and Financial Agent forthe Federal Government, was signed on October 8, 1995, and declared effective on March 15,1996.

From the signing of the legal documents onwards, the excellent collaboration among the agenciesinvolved with the execution of the program was reaffirmed: the Secretariat of Health (SSA), theWorld Bank and the Secretariat of Finance and Public Credit (SHCP).

a) Legal Aspects

Several amendments to the loan's legal documents were negotiated with the World Bank duringthe process of project execution related to the following topics:

> Increases in the financing percentages> Incorporating eligible expenditures> Closing date extension> Reallocation of funds among categories> Modification to the Letter of Implementation> Expansion of coverage> Contracting procedures for consultants

b) Supervision:

The supervision by the Bank's supervision team of program activities at the central and stateslevels during the course of numerous missions was carried out consistently with a high degree ofprofessionalism, providing specialized technical assistance in all areas of concentration for each ofthe components of the program, and always proposing in agreement with the authorities of SSA,SHCP and NAFIN, several strategies to make the implementation of this operation more efficient.

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c) Procurement and Consultancy Services

Regarding the commitment of funds through contracting for goods, works and consultancyservices, it is worth noting that the organizational structure of SSA at the central and state levelwas exemplary in following international and national competitive bidding as well as procurementprocesses such as price comparisons and direct purchasing. It is worth noting that in the last yearof program implementation, it was the SSA that carried out a pilot effort agreed between theGovernment of Mexico and the World Bank to procure goods and works by using online accessthrough the COMPRANET (Electronic procurement of the Federal Government) system, thatallowed eligible bidders to submit their bids through the internet. The result of this pilot was acomplete success since it allowed an increase in the number of bidders and a reduction in the costof products procured.

d) Financial Aspects

The total amount of the loan for US$310 million was disbursed in its entirety, avoiding partialcancellations y reaching the achievement of objectives agreed with the Bank. On September 17,2002, the last disbursement was made for an amount of $537,044.23. The Table of LoanCategories presented the following disbursements:

CATEGORY DISBURSEMENT1.- Civil Works 16,407,755.072.- Goods

Publications 1,833,007.06Harmaceuticals, Medical Supplies 85,263,699.57Vehicles 7,691,974.33Furniture and Equipment 29,704,907.60

3.- Training 1,043,754.704.- Technical Assistance and Consulting 7,796,204.44Services5.- Incremental Operating Costs 160,158,697.23TOTAL 310,000,000.00

Conclusions

In view of the above, it is the opinion of NAFIN that the implementation of this operation wassuccessful, because of the participation of excellent professionals on the part of the implementingagency (SSA) and on the part of the World Bank in the legal, technical and financial-economicareas. Therefore this loan is considered one of the best in Mexico due to its impact and thequality of its implementation.

December 3, 2002EGD

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H. Comments from the Federal Secretariat of Finance and Public Credit (SHCP)

Below is an unofficial translation of the comments received from the Guarantor. The Guarantor'soriginal comments in Spanish are presented in Annex 7.

Unofficial Translation

General Sub-Directorate for International Financial OrganizationsSecond Basic Health Care Project (Loan No. 3943-ME)

Comments on the Implementation Completion Report (ICR)

The General Sub-Directorate for International Financial Organizations (DGAOFI) considersthat:

1. This Project was efficient as it not only complied in general with its objectives andcoverage targets, but also because of the efficient implementation on the part of SSA.

2. It is important that this type of project be supported not only financially but alsotechnically by international financial organizations like the World Bank, since they have a veryfavorable impact on the living conditions of the population and can be important factors in thefight against poverty.

3. It would be important for the Bank to strive to establish strategies and mechanisms so thatthe design and implementation of future programs take into account the benefits and/or difficultiesof having worked the PAC with Bank financing, with the objective of perfecting future programs.

4. The implementation of the Project was very satisfactory in view, among other factors, ofthe close and efficient collaboration between the authorities of SSA and the Bank, as well as theestablishment of communication networks between the state and federal levels and health areas,which resulted in effectively communicating, transmitting and recording information.

5. Finally, it is recommended to use as a guide the key characteristics of this Programapplying them to future projects aimed at supporting the Federal Government's strategy of basichealth services provision to the most vulnerable population in states with the highest level ofdisenfranchisement.

(b) Cofinanciers:

(c) Other partners (NGOs/private sector):

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10. Additional Information

The Implementation Completion Report (ICR) Team consisted of:

- Willy De Geyndt (Task Team Leader)- Maria Colchao (Program Assistant)- Jorge Omar Moreno Trevifio (Economist)

The GOM counterpart team consisted of Dr. Jorge Saavedra and Dra. Carmen Rodriguez Dehaibes.

Comments were received from:

Evangeline Javier, Suzana de Campos-Abbot, Helen Saxenian, Maria-Luisa Escobar, Patricio Marquez,Claudia Macias, Michele Gragnolati (LCSHD); Mariangeles Sabella (LEGLA); HernAn Montenegro, andManuel Vazquez (PAHO).

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome/Impact Indicators:

-Oufcome Indicators for Basic Health Services 1995 1999PfrvMied to PAC Beneficiaries in the Six Poorest Change'-Sttes 1995-1999Life Expectancy at Birth

Female 75.1 75. 0.4Male 68.4 70. 3.2National Female 76.2 77. 1.4National Male 69.8 72. 4.3

Total Fertility Rate 1996 &2000 * 3.17 2.75 -13.Maternal Mortality /100,000 registered live births 72 55 -18* Estimate from the Consejo Nacional de Poblaci6n

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Output Indicators:

.)'Coverage 19,96-2001 a - Jjf 1996 2001%- -c-. - ~ - ______________ C hange

Population servedTotal six poorest states 3,252,500 6,724,10 107Total PAC beneficiaries 3,878,100 8,976,500 131Number of Health Jurisdictions 31 10( 222Number of Municipalities 380 878 131Number of Communities 10,764 46,493 332Number of Itinerant Health Teams

Mobile Units 613Foot Brigades 181Mixed 595

Number of Health Centers 505 2404 376b) tlealbhSr J3T~A~ , . U2 7 - t I 1998 i . 2001 ./O ChangeMedical Visits/1,000 people 605 1174 94Nutritional control visits/1,000 children under 5 years 1081 2263 109Visits for Diarrheal Diseases/1,000 children under 5 531 724 36Visits for Acute Respiratory Infections/ 1,000 children under 5 37 508 34cl) Anii Reso,urcesjAdmde 6 - _ 2001 -'Physicians 1552Nurses 1538Other Health Staff 1604Non-Health Support Staff 434

Sources:SSA Anuanos Estadisticos de la SSA 1995-2000.SSA. Sistema de Informaci6n en Salud para Poblaci6n Abierta (SISPA) 1998 - 2001.SSA Programas de Equidad y Desarrollo en Salud. pnncipales Resultados 1996 - 2001SSA. Catfilogo de unidades m6dicas de pnmer nivel de atenci6n 1998 - 2001.CONAPO Proyecciones de poblaci6n 1995-2020

INEGI. Xll Censo de Poblaci6n y Vivienda 2000. Tabuladores basicos.

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)Appraisal Actual/Latest Percentage ofEstimate Estimate Appraisal

Project Cost By Component US$ million US$ million1. Basic Health Care Services 335.30 618.90 184.62. Institutional Development and Decentralization 61.10 7.70 12.63. Modernization and Restructuring of the SSA 47.00 12.40 26.4

Total Baseline Cost 443.40 639.00

Total Project Costs 443.40 639.00Total Financing Required 443.40 639.00 _

Actual project cost (US639.0 million) include additional resources allocated by the Mexican Government.

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Procurement MethodExpenditure Category -ICB NCB Othe N.B.F. Total.Cost

1. Works 0.00 23.70 21.30 0.00 45.00(0.00) (16.20) (15.10) (0.00) (31.30)

2. Goods 37.10 13.40 108.60 0.00 159.10(33.30) (12.10) (68.90) (0.00) (114.30)

3. Services 0.00 0.00 86.70 0.00 86.70(Training, Consultants, (0.00) (0.00) (86.70) (0.00) (86.70)Studies and TechnicalAssistance)4. Operating Costs 0.00 0.00 145.90 6.80 152.70

(0.00) (0.00) (77.70) (0.00) (77.70)Total 37.10 37.10 362.50 6.80 443.50

(33.30) (28.30) (248.40) (0.00) (310.00)

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Project Costs by Procurement Arrangements (Actual/Latest Estimate)

(US$ million equivalent)

Expending Category ICB NCB Others 3' NBF TOTAL

1-WORKS 0.00 8.70 30.90 0.00 39/60(16.4)

2-GOODS 53.80 50.20 86.80 0.00 190.80(133.4)

3-SERVICES 0.00 0.00 10.10 0.00 10.10(Training, (0.0)Consultants, Studiesand TechnicalAssistance)4-OPERATING COSTS 0.00 0.00 398.50 0.00 398.50

(1 60.2)TOTAL 53.80 58.90 526.30 0.00 639.0 4'

(310.00)

"Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.

2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staffof the project management office, training, technical assistance services, and incremental operating costs related to (i)managing the project, and (ii) re-lending project funds to local government units.

3/ Costs by method correspond to Federal expenses only; State and geographic expansion expenses are included under"Other methods"

4/ Actual project cost (US639.0 million) include additional resources allocated by the Mexican Government.

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PAC Total Costs by Expenditure Category and by Financiers, 1996-2001 '

ACTUAL I LATEST ESTIMATE % OFAPPRAISAL APPRAISAL

EXPENDiTURE CATEGORY ESTIMATE; Word GovBn ment (WithoutC Bank State Total ~~~~State(Total) Bak Federalr tt 31 otiuin

2____ Le'vel Lenriueln

A. Civil Works 45.2 16.4 5.4 17.7 39.5 48.2%

B. Goods & Equipment 104 124.6 27.2 39.0 190.8 146%

C. Training 8.6 1.0 0.1 0.1 1.2 12.8%

D. Consultants, Studies and 78.1 7.8 1.0 0.1 8.9 11.3%Technical Assistance

E. Operating Costs 207.2 160.2 2151 23.2 398.5 181.3%

TOTAL 443.3 310.0 248.8 80.1 639.0 126%J__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _4 /

I/ Numbers may not add perfectly due to rounding.21 This data includes the 'Geographic Expansion'account (US$ 50.6 million) that govemment not recognizes as abudget part of the program.3Y Data indudes both Federal Govemment and StateGovemment4/ Actual project cost (US$639 0) indude additional resources allocated by the Mexican GovemmentNumbers may not add up due to rounding.

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Annex 3. Economic Costs and Benefits

An ex-ante economic benefits analysis was carried out during project preparation in 1994. The analysisassumed a target population of 15 million people and an estimated loss of 5 million DALYs in the elevenstates. The number of DALYs lost was based on a study of 100 health interventions by FUNSALUD andthe Government of Mexico that estimated 12.8 million DALYs lost prematurely in 1991 in the wholecountry. Assumptions changed during project implementation as eight more states were added, a moreprecise targeting mechanism reduced the targeted population by one third, and a basic health care servicespackage of thirteen interventions was defined. An ex-post analysis attempted to compare the results of theproject with the ex-ante analysis. The outcome of the ex-post analysis could not be retained as valid androbust. Changes in the assumptions that occurred during project implementation strongly limited thecomparability and legitimate questions were raised about the reliability of the 1991 data.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g. 2 Economists, 1 FMS, etc.) Implementation Development

Month/Year Count Specialty Progress Objective

Identification/Preparation01/10 1994 2 TASK MANAGER (1);

HEALTH ADM.SPEC. (1)04/05/1994 1 PUBLIC HEALTH (1)05/09/1994 S TASK MANAGER (1); PUBLIC

HEALTH SPEC (1); HEALTHECON (1); HEALTHADM.SPEC (2)

06/05/1994 4 TASK MANAGER (1); PUBLICHEALTH SPEC (1); HEALTHECON (2)

07/18/1994 4 PUBLIC HEALTH SPEC (1);HEALTH ECON (1); HEALTHADM.SPEC (2)

10/10/1994 5 TASK MANAGER (1); PUBLICHEALTH SPEC (1); HEALTHECON (1); PROCUREMENTSPEC (1); OPERATIONSANALYST (1)

Appraisal/Negodation11/7/1994 8 TASK MANAGER (1);

OPERATIONS OFFICER(1); PUBLIC HEALTHSPEC (1); HEALTH ECON(1); PROCUJREMENT SPEC(1); OPERATIONSANALYST (1); HEALTHADM.SPEC (1);INFORMATION SPEC (1).

02/20/1995 2 TASK MANAGER (1);DIVISION CHIEF (1)

11/28/1995 2 HEALTH ECONOMIST (1);INFORMACION SPEC (1)

Supervision02/12/1996 1 TASK MANAGER (1) HS HS02/20/1997 2 TASK MANAGER (2) S S04/29/1998 2 PUBLIC HEALTH (1); HS HS

POLMCAL ECONOMY (1)12/09/1998 4 PUBLIC HEALTH (1); HS HS

OPERATIONS OFFICER (1);PROCUREMENT SPEC. (1);MANAGEMENT SPEC. (1)

04/19/1999 8 TASK MANAGER (1); HS HSOPERATIONS OFFICER (1);FIN. MANAGEMENT SPEC.

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(1); PROCUREMENT SPEC.(1); PROGRAM ASSISTANT(1); MANAGEMENTSPECIALIST (1); HEALTHSPECIALIST (1); HEALTHECONOMIST (1)

04/19/1999 11 TASK MANAGER (1); HS HSSECTOR MANAGER (1);OPERATIONS ANALYST (1);ECONOMIST (1); SECTORLEADER (1); PROGRAMASSISTANT (1);MANAGEMENT SPECIALIST(1); HEALTH SPECIALIST (1);SOCIAL SECTOR SPEC. (I);PROCUREMENT SPEC. (1);FINACIAL MANAGEMENT SP(1)

10/11/2000 8 TEAM LEADER (1); HS HSOPERATIONS OFFICER (1);SECTOR LEADER (I);PROGRAM ASSISTANT (1);PROCUREMENT SPECIALIST(1); INSTITUTIONALDEV.(CON (1); PUBLICHEALTH (CONS) (1);FINANCIAL MANAGEMEN.SP(1)

10/03/2001 3 TEAM LEADER (1); HS HSOPERATIONS OFFICER (1);PROGRAM ASSISTANT (1);PROCUREMENT SPEC (1);FINANCIAL MANAGEMENTSP (I)

03/25/2002 6 TEAM LEADER (1); HS HSOPERATIONS OFFICER (1);PROGRAM ASSISTANT (1);INSTITUTIONAL DEV.(CON(1); PUBLIC HEALTH (CONS)(I); TEAM ASSISTANT(I)

ICR10/15/2002 2 INSTITUTIONAL HS HS

DEV.(CON); ECONOMIST(1) 3

- 35 -

(b) Staff.

Stage of Project Cycle Actual/Latest Estimate. No. Staff weeks US$ ('000)

Identification/Preparation 1 19(*) 293,580Appraisal/NegotiationSupervision 93 356,361ICR 3 12,927Total 215 448,066

(*) Estimated based on data provided by BW, Fact and SAPAppraisal and Negotiations information included in Preparation

- 36 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies O H OSUOM O N * NA

OSector Policies OH OSUOM ON O NA2|Physical OH *SUOM ON ONA? Financial O H OSUOM O N O NA

F Institutional Development 0 H O SU O M 0 N 0 NAO Environmental O H OSUOM O N * NA

SocialFPoverty Reduction * H OSUOM O N O NAs Gender O H OSUOM O N O NAD Other (Please specify) O H OSUOM O N * NA

Fl Private sector development 0 H O SU O M 0 N * NAO Public sector management 0 H O SU O M 0 N 0 NAOi Other (Please specify) O H OSUOM O N * NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bankperformance Rating

O Lending OHS OS OU OHUO Supervision OHS OS OU OHUO Overall OHS OS O U O HU

6.2 Borrowerperformance Rating

OI Preparation OHS OS 0 U O HUO Government implementation performance 0 HS OS 0 U 0 HUO Implementation agency performance 0 HS O S 0 U 0 HUOL Overall OHS OS O U O HU

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Annex 7. List of Supporting Documents

1. Staff Appraisal Report, August 30, 1995

2. Project reports

Back-to-Office Report January 5, 1994Back-to-Office Report January 25, 1994Back-to-Office Report April 19, 1994Back-to-Office Report May 17, 1994Aide Memoire June 11, 1994Back-to-Office Report September 8, 1994Back-to-Office Report October 31, 1994Aide Memoire November 18, 1994Back-to-Office Report March 7, 1995Back-to-Office Report November 27, 1995

Supervision Report March 19, 1996Supervision Report April 23, 1997Supervision Report September 22, 1997Supervision Report May 22, 1998Supervision Report December 17, 1998Supervision Report April 29, 1999Supervision Report April 20, 2000Supervision Report October 17, 2000Aide Memoire October 3, 2001Aide Memoire March 25, 2002

3. Other documents

Analitica Consultores. 2001. Primer Informe Expost del Programa de Ampliaci6n de Cobertura SSA1996-2000.

Diario Oficial: Se Crea el Organismo Descentralizado de la Administraci6n Piblica Estatal Denominado"Servicios de Salud de Yucatan", 13 de diciembre de 1996

Frenk Mora, Julio y otros. 1994. Economia y Salud: Propuestas para el Avance del Sistema de Salud enMexico. Fundaci6n Mexicana para la Salud.

Gragnolati, Michele y otros. 2002. El programa para la ampliaci6n de servicios de salud a poblacionespobres de Mexico (PA C). Un analisis de cobertura y costo-efectividad. Banco Mundial.

SSA (1999): Evaluaci6n de Medio Camino, April 12, 1999

SSA (2000): El Programa de Ampliaci6n de Cobertura 1996-2000

SSA (2000): Health Extension Services in Mexico

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SSA (2000): Evaluacion del Programa de Ampliaci6n de Cobertura, April 5, 2000SSA (2000): Supervisi6n del Programa de Ampliaci6n de Cobertura, October 3, 2000

SSA (2001): Boletin informativo de los avances en la equidad y desarrollo de los servicios de salud, 2001

-40 -

4. Comments from the National Financing Agency (NAFIN) dated December 3, 2001

PRESTAMO 3943-MESEGUNDO PROGRAMA DE APOYO A LOS SERVICIOS BASICOS DE SALUD

COMENTARIOS AL INFORME DE EVALUACION EX - POSTNACIONAL FINANCIERA S.N.C.

Esta operaci6n por 310.0 mdd en la que NAFIN fungi6 como Prestatario y Agente Financiero delGobiemo Federal, se suscribi6 con fecha 8 de octubre de 1995, declarandose en efectividad el 15 de marzode 1996.

A partir de la firma de los documentos legales, se reafirm6 la excelente colaboraci6n que se tuvo con lasentidades involucradas en el proceso de ejecuci6n del Programa: Secretaria de Salud, Banco Mundial ySecretaria de Hacienda y Credito Puiblico.

a) Aspectos Legales.

Durante el proceso de ejecuci6n del programa, se negociaron con el Banco Mundial diversas enmiendas alos documentos legales del pr6stamo en relaci6n a los siguientes aspectos:

Incremnento en porcentajes de financiamiento> Incorporaci6n de gastos financiables);> Extensi6n a la fecha de cierre> Transferencia de recursos entre Categorias> Modificaci6n de Carta de Implementaci6n> Ampliaci6n de cobertura> Procesos de Contrataci6n de Servicios de Consultoria

b) Supervisi6n:

El seguimiento que el Equipo de Supervisi6n del Banco realiz6 a traves de innumerables Misiones a lasactividades del Programa a nivel central y en los Estados, se llev6 a cabo de manera constante y con altonivel de profesionalismo, proporcionando asistencia tecnica especializada en todos los campos de acci6n decada uno de los Componentes del Programa, proponiendo siempre en acuerdo con las autoridades de laSSA, SHCP y NAFIN, diversas estrategias para eficientar la ejecuci6n de esta operaci6n.

c) Licitaciones y Servicios de Consultoria

En materia de compromiso de recursos a traves de la contrataci6n de bienes, obras y servicios deconsultoria, seiialar que la estructura organizacional de la SSA a nivel central como estatal fue un ejemploen cuanto a la forma de operar los procedimientos de licitaci6n puiblica internacional, nacional y procesoscomo comparaci6n de precios y adjudicaciones directas. Cabe sefialar que en el ultimo afno de ejecuci6n delprograma, la SSA fue quien realiz6 la prueba piloto acordada entre el Gobierno Mexicano y el BancoMundial para la licitar bienes y obras mediante la utilizaci6n de medios remotos por medio del sistema deCOMPRANET (Compras electr6nicas del gobierno federal), de tal forma que los licitantes elegiblespudieran enviar sus ofertas via internet. El resultado de la prueba fue todo un exito ya que se lograincrementar el numero de participantes y una reducci6n en el monto de los productos adquiridos.

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d) Aspectos Financieros

El monto total de la linea del prestamo por 310.0 mdd se desembols6 en su totalidad, evitandocancelaciones parciales y alcanzando el cumplimiento de metas comprometidas con el Banco. Con fecha 17de septiembre de 2002 se tramit6 el ultimo desembolso del prestamo por un monto de 537,044.23 d6Mares,de esta forma, el Cuadro de Categorias del Prestamo, registro los siguientes desembolsos

CATEGORIA DESEMBOLSO1.- Obra Civil 16,407,755.072.- Bienes

Publicaciones 1,833,007.06Farmaceuticos, Consumibles Medicos 85,263,699.57Vehiculos 7,691,974.33Mobiliario y Equipo 29,704,907.60

3.- Capacitacion 1,043,754.704.- Servicios de Asistencia Tecnica y 7,796,204.44Consultoria5.- Costos Operativos Incrementales 160,158,697.23TOTAL 310,000,000.00

Conclusiones

Por lo anteriormente expuesto, en opini6n de NAFIN, la ejecuci6n de esta operaci6n fue exitosa, al contarcon la participaci6n de excelentes profesionales por parte de la Dependencia Ejecutora (SSA) y por partedel Banco Mundial en el ambito legal, tecnico y econ6mico financiero, lo que permiti6 que este prestamosea considerado como uno de los mejores en M6xico por su impacto y calidad de ejecuci6n.

3 de Diciembre de 2002EGD

-42 -

5. Comments from the Federal Secretariat of Finance and Public Credit dated December 16, 2002

DIRECCION GENERAL ADJUNTA DE ORGANISMOS FINANCIEROS INTERNACIONALES

PROGRAMA DE AMPLIACION DE COBERTURA (PRESTAMO NO. 3943-ME)

COMENTARIOS AL IMPLEMENTATION COMPLETION REPORT (ICR)

La Direcci6n General Adjunta de Organismos Financieros Internacionales (DGAOFI) considera que:

1. Este Proyecto fue eficiente debido a que cumpli6 en general con sus objetivos y metas de cobertura,asi como por la eficaz implementaci6n por parte de la SSA.

2. Es conveniente que este tipo de proyectos sean apoyados tanto financiera como tecnicamente pororganismos financieros internacionales como el Banco Mundial, debido a que tienen un impacto muyfavorable en las condiciones de vida de la poblaci6n y pueden ser factores importantes en el combate a lapobreza

3. Seria conveniente que el Banco busque establecer los mecanismos y estrategias para que en eldisenlo y ejecuci6n de programas subsecuentes sean tomados en cuenta los beneficios y/o dificultades dehaber trabajado el PAC con el financiamiento del Banco, a efecto de perfeccionar futuros programas.

4. La ejecuci6n del Proyecto fue muy satisfactoria debido, entre otros factores, a la estrecha yeficiente colaboraci6n entre las autoridades de la SSA y el Banco, asi como por el establecimiento de redesde comunicaci6n entre el nivel estatal, federal y las jurisdicciones de salud que dio como resultado unaeficaz comunicaci6n, transmisi6n y registro exitoso de datos.

5. Finalmente, seria recomendable tomar como guia las caracteristicas de este Programa identificadascomo claves en la realizaci6n de futuros proyectos dirigidos a apoyar la estrategia del Gobiemo Federal enla provisi6n de servicios bisicos de salud a la poblaci6n mas vulnerable de los estados con mayor nivel demarginaci6n.

-43 -

- 44 -

ItO. Sr0 0 0* IBRD 235

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M E X I C O3D-

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Repoki No.: 25240Type: $C.I