Document of

The World Bank FILE COPYFOR OMCIAL USE ONLY

Report No. P-2589-ES

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

REPUBLIC OF EL SALVADOR

FOR A

FOURTH EDUCATION PROJECT

June 8, 1979

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

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CURRENCY EQUIVALENTS

Currency Unit - Colon (¢)US$1 = ¢ 2.50Colones ( ) = US$0.40

FISCAL YEAR

January 1- December 31

ABBREVIATIONS

ANTEL The National Telecommunications AgencyCABEI Central American Bank for Economic IntegrationCACM Central American Common MarketCEL Lempa River Hydroelectric CommissionCENCAP National System of Agricultural TrainingCENTA National Center of Agriculture and Livestock TechnologyCOFINTA Agricultural Land BankCREA Center for the Production of Teaching-Learning MaterialsDAE Directorate of Educational ArchitectureFSDVM Salvadorian Foundation for Development of Low-Cost HousingIDB Inter-American Development BankITV Instructional Television Program of the Ministry of

EducationITCA Central American Technological InstituteITESS San Salvador Technological InstituteNVTC National Vocational Training CouncilUNDP United Nations Development ProgramUSAID U.S. Agency for International Development

FOR OFFICIAL USE ONLY

EL SALVADOR

FOURTH EDUCATION PROJECT

LOAN AND PROJECT SUMMARY

BORROWER: Republic of El Salvador

AMOUNT: US$23.5 million.

TERMS: Repayment in 20 years including a grace period of fiveyears at an interest of 7.9 percent per annum.

PROJECTDESCRIPTIONI: The main objective of the project is to assist the Gov-

ernment in carrying out principal elements of its

education and training strategy set forth in the 1978-1982 Third Education Development Plan. They includeexpanding basic education and training opportunitiesfor children and adults in rural communities, improvingthe quality and efficiency of rural school administrationand supervision, expanding in-service training programsfor basic education teachers and school directors, ex-panding the production of textbooks and teaching materialfor basic education, and establishing a new post-secondarytechnological institute to train technicians in selectedpriority specializations needed for the country's indus-trial development.

The project consists of construction, replacement orexpansion and equipping and furnishing of 245 schoolsin rural communities, equipping and furnishing of anadditional 1ll such schools; equipping and furnishingnew facilities being constructed at the National TeacherTraining School and provision of supplies for the pro-duction of teacher training material; production ofabout one million basic education textbooks and teach-ing guides; construction, equipping, and furnishing ofa new post-secondary technical institute; and technicalassistarLce for the physical, educational and administrativeaspects of project implementation and the operation of pro-ject facilities.

The project entails no special risks.

This docunment has a restricted distribution and may be used by recipients only in the performanceof their offlcial duties. Its contents mray not otherwise be disclosed without World Bank authorization.

ESTIMATED COST: (US$ Million)Local Foreign Total

Basic Education

New Construction, Replacementand Expansion of Schools 9.1 6.0 15.1

Equipment for Existing Schools -- * 0.2 0.2In-Service Teacher Training andEvaluation 1.7 0.9 2.6

Textbooks and Teaching Materials 2.0 1.0 3.0School Administration andSupervision, and CurriculumDevelopment 0.2 0.2 0.4

San Miguel TechnologicalInstitute 1.0 1.0 2.0

Technical Assistance -- 1.2 1.2

Project Administration 0.5 -- * 0.5

Base Cost 14.5 10.5 25.0

Contingencies

Physical 1.5 1.1 2.6Price 3.6 2.4 6.0

Total Costs 19.6 14.0 33.6

FINANCING PLAN: (US$ Million)Local Foreign Total

Bank 9.5 14.0 23.5Government 10.1 -- 10.1

Total Project Cost 19.6 14.0 33.6

PROJECTEDDISBURSEMENTS: US$ Million Equivalent

Bank FY 1980 1981 1982 1983 1984

Annual 0.7 6.0 7.0 7.0 2.8Cumulative 0.7 6.7 13.7 20.7 23.5

APPRAISAL REPORT: Report No. 2458a-ES, dated May 21, 1979.

* Under US$0.1 million.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON A PROPOSED

LOAN TO THE REPUBLIC OF EL SALVADORFOR A FOURTH EDUCATION PROJECT

1. I submit the follolwing report and recommendation on a proposed loan

for the equivalent of US$23.5 million to the Republic of El Salvador to help

finance a Fourth Education Project. The loan would have a term of 20 years,

including five years of grace, with interest at 7.9 percent per annum.

PART I - THE ECONOMY

2. An economic report on El Salvador (2287-ES) was distributed to

the Executive Directors on May 7, 1979. The report is based on the findings

of an economic mission to El Salvador in April 1978 and was updated based on

discussions held with the Government in March 1979. The main findings ofthe report are summarized below. Country data sheets are attached as

Annex I.

3. El Salvador has registered substantial economic gains since 1960.

During 1960-78 the economy's growth rate averaged 5.2 percent a year, and in

spite of rapid population growth, raised per capita incomes by 45 percent.During this period, exports and investment have been the major engines of

growth. Exports rose from 22 percent of GDP in 1960-62 to 34 percent of

GDP by 1976-78. At the same time, investment growth outstripped outputgrowth and raised the investment/GDP ratio from 14 percent in 1960-62 to20 percent in 1976-78.

4. Nevertheless, El Salvador remains among the poorest countries inLatin America. It still has one of the lowest income levels (US$570 in 1977) 1/

among the countries in the Western Hemisphere. It has the smallest land area

in Central America and the highest population density (205 per square kilo-meter), with only a third of a hectare of arable land per capita. These

density ratios are comparable to those of the Caribbean and India. Nutritional

standards are low; protein and calorie deficiencies are common. Roughly 68

percent of the dwellings are without piped water and 55 percent withoutelectricity. Income and land ownership are highly concentrated.

5. Because of its already high population density, rapid populationgrowth, at about 3 percent a year, is the country's most fundamental problem.The country has, however, reached that stage where both birth and death rateshave begun to decline. The Government is trying to accelerate the fertilitydecline through a family planning program which has been relatively successful.

1/ World Bank Atlas Methodology.

By mid-1977, an estimated 20 percent of the fertile female population was beingreached and the Government hopes to raise coverage to 30 percent by 1982, atarget which may be surpassed. The program has support from USAID, the UnitedNations Family Planning Agency, and the Planned Parenthood Federation.

6. As a result of past rapid population growth, the rate of laborabsorption is now a serious socio-economic problem. Limited opportunitiesfor increased agricultural employment and the return of Salvadorian migrantsfrom Honduras taxed the employment creation capacity of the economy in the1970s. Even with manufacturing employment expanding at about 4 percent ayear, a significant portion of new employment took place in the informalurban sector, which often provides incomes only at subsistence levels.

7. Although agriculture directly provides about one-fourth of GDP,employment for one-half of the economically active population, and two-thirdsof export earnings, living conditions and incomes in rural areas--where 60percent of the population resides--are considerably worse than in the cities.In addition, arable land is limited with about 2-3 hectares per agriculturalworker. As a result of land limitations and rural-urban income differentials,migration to the cities is expected to accelerate in the next few years.

8. Manufacturing, which accounts for about one-fifth of GDP but onlyone-tenth of the employed labor force, is highly concentrated in the SanSalvador area. Manufacturing production and employment fluctuated during1960-78, particularly after 1969 when the conflict with Honduras resulted inthe loss of the Honduran market, but real value added in the sector averaged7.1 percent yearly over the period. Manufacturing exports to the CACM, however,have now reached a stage of diminishing opportunities for easy regional importsubstitution, which, given the growing labor force and limited agriculturalresource base, creates the need of developing manufactured exports to thirdmarket countries in order to absorb the additions to the labor force.

Government Development Policies

9. While the past role of the public sector in the economy was limited,the Government is now adopting a more active development posture. This isreflected in both the increased level of Government expenditures and moredevelopment-oriented policies, particularly for agriculture and manufacturing.During 1960-72, Government expenditures (about 12 percent of GDP) closelymatched revenues. In the last few years, however, revenues and expenditureshave increased rapidly, reaching 15-16 percent of GDP, with most of the in-crease allocated to capital outlays. Since 1973, public fixed investment invirtually all sectors has recorded substantial real increases, although thelargest increases have taken place in power, transport, and telecommunications,where the absorptive capacity is highest. Social and directly productive in-vestments, as well as financial investment for housing, however, have also grown.

10. While agricultural policies during the 1960s were mainly concernedwith export promotion, they have been recently more concerned with land distri-bution, small farmer incomes, and increasing the output of staple food crops.

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In May 1975, the Congress passed El Salvador's first comprehensive land

reform law. Efforts to implement a major land reform project in 1976, however,

failed because of strong resistance from large landowners and were followed

by rising social tensions. The administration which took office in 1977

has redirected its land distribution efforts to a new institution (COFINTA),

which will purchase land and redistribute it to small farmers (with a target

of about 100,000 has. by 1982). COFINTA will receive a Government contribution

of US$40 million over the next five years, supplementing these resources with

domestic and foreign credits. At the same time, the Government has developed

programs (including projects for integrated rural development in the Departments

of Chalatenango and Morazan) to raise living conditions in the Northern Zone,

where a large proportion of the very small farms are located.

11. Industrial policy during the 1960s and early 1970s promoted manu-

factured exports within the Common Market. As export growth to this market

slowed, the Government made efforts to stimulate labor-intensive exports to

third countries through fiscal incentives, free trade zones, and improved

services to industry. An Export Development Law, which offers substantial

fiscal incentives to export industries, was passed in 1974. The first free

zone, located in the outskirts of San Salvador, attracted a number of plants,

some of them foreign industries with labor-intensive assembling processes.

These efforts, however, have not yet been very successful, partly because of

a general slowdown in private investment (see para. 13 below) and partly

because of the industrialists' orientation to the CAGM.

12. To improve urban living conditions, public housing agencies have pro-

vided about 25,000 housing units for low- and medium-income households during

1973-78, complemented with additional assistance to community development

projects. A private organization, Fundacion Salvadorena de Desarrollo y Vivienda

Minima (FSDVM), has also become a major provider of low-cost housing and community

development in cooperation with the Government and the Bank Group. By 1978,

FSDVM had planned, designed, and assisted in the construction of about 6,000

serviced sites. Further Government efforts are underway to improve housing

conditions and incomes in San Salvador and several major cities by constructing

over 60,000 urban housing units during 1978-82, by providing land, housing credit

and services to over 10,000 of the lowest income families, and by providing credit

and training; the latter for both informal sector entrepreneurs and urban workers.

Recent Economic Developments

13. During 1976 and 1977, sharp increases in coffee prices significantly

improved the balance of payments and fiscal situation. As Government revenues

increased, public investment expanded significantly. Real GDP growth at 4.5

percent a year in 1976-77, however, was below the 5.5 percent a year recorded

during 1970-75. This was the result of a drought that reduced agricultural

output and a slowdown in private investment primarily because of a low investor

confidence in the wake of rising violence. Over the last few years a number of

prominent local and foreign businessmen as well as Government officials,

political leaders, clergymen, students and peasants have been killed or

kidnapped. Inflation accelerated to 12 percent in 1977 compared to 7 percent

in 1976, owing to sharply increased prices of drought-affected basic grains;

the high level of liquidity brought about by the large coffee export earnings;

and rising import prices. The balance of payments' current account in 1976-77

was in virt:ual equilibrium, recovering from the unusually high deficits in

1974 and 1975 which resulted from the slack in foreign demand and fast risingimport prices. The Central Government budget was in surplus in 1977 as thetotal tax burden increased from 12 percent of GDP in 1975 to about 17 percentin 1977.

14. The economic situation was less favorable in 1978. Real GDPgrowth is estimated at about 4.4 percent owing to slower growth of exportvolumes and investment, and a decline in coffee prices. The inflation rateincreased slightly to 13 percent. In the first half year, export and fiscalreceipts deteriorated sharply because the Salvadorian Coffee Company withheldcoffee sales, on the expectation of a future price rise. Although coffeesales were resumed in September, the balance of payments showed a largecurrent account deficit (about US$240 million, or 8 percent of GDP). Foreignexchange reserves, however, increased by about US$29 million as externalborrowing, much of it by the Central Bank, accelerated. Central Governmentfinances also deteriorated; current savings declined as wages and transfersrose, and lower coffee tax receipts, partly due to the postponement of coffeesales, led to a drop in revenue buoyancy.

Future Prospects and Development Programs

15. In the longer term, even under the most favorable assumptionsregarding fertility declines, the population of El Salvador is expected to beat least 1.6 times its present size by the year 2000. A population of thismagnitude will place severe pressures on agricultural land, water resourcesand public services, and greatly increase the demand for urban jobs. Notonly must El Salvador increase agricultural productivity rapidly, it must--atthe same time--rapidly expand manufactured exports if it is to grow satis-factorily and provide productive employment for its increasing labor force.Furthermore, Government programs need to focus on strategies to expand thecoverage of basic public services and further reduce population growth.

16. The medium-term outlook is closely related to export growth,basically that of coffee and manufactured exports, and to the investmentprospects. While coffee prices are not likely to reach 1977 levels during thenext few years, export volume is expected to increase slowly. Manufacturedexports will depend on CACM prospects and the effective promotion of labor-intensive, manufactured exports to non-CACM countries. Public investment isexpected to grow faster than GDP and increase its share of total fixed invest-ment. Private investment trends, however, will be influenced most by thepolitical climate. On the basis of the present prospects for export andinvestment growth and an expected recovery in agricultural production, GDP isexpected to increase at only 4.5 percent a year during 1979-82. While theGovernment is determined to expand exports as fast as possible, and intends toreduce the growth of consumer imports through tight monetary and fiscalmeasures, the current account deficits will likely be larger than in the pastbecause of increasing imports of capital goods and intermediate products, andthe prospects for deterioration in the terms of trade. Thus, foreign creditswill be needed in larger quantity than has been the case up until now.

17. The Government has recently published a 1978-82 Development Plan.The Plan proposes significant investments in infrastructure and larger creditavailabilities for agriculture and industry, but also increased investmentsin housing, education, health, water and sewerage. Taking into account the

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status of the various projects and the country's financial and administrative

capacity, a. scaled-down public investment program (fixed and financial), which

totals about US$2.5 billion equivalent is projected by Bank staff for 1978-82.

About 71 peircent or US$1.8 billion represents fixed investments, of which

physical infrastructure amounts to US$0.8 billion, social investments, US$0.6

billion, and the productive sectors, the remainder. This distribution repre-

sents a change from earlier patterns that allocated larger percentage alloca-tions for physical infrastructure. However, actual investments may show a

higher infrastructure component, since these are sectors where executing

capacity is well established.. Given the large increase in planned public

investment, the Government is now considering new revenue measures to increase

public savings, which will be affected during 1979-82 by the decline in coffee

prices.

External Assistance

18. As of December 31, 1977, the country's external debt outstanding

and disbursed repayable in foreign currency amounted to US$265.9 million,

or 9.4 percent of GDP. The public debt service ratio was 4 percent in

1976, rose to 6 percent in 1977 because of some prepayment of existing debt,

and is estimated at about 4 percent for 1978. In terms of the sectoral

thrust of lending during 1950-78 by the principal external agencies apart

from the Bank, the Inter-American Development Bank (IDB) has lent US$266.4

million, mainly for power, water and sewerage and agricultural credit; theCentral American Bank for Economic Integration (CABEI) US$150.8 million,

mainly for industry and infrastructure projects with a regional impact;

and the U.S. Agency for International Development (USAID) US$64.2 million

mostly for agriculture, basic education, health, housing, and industry.

19. In the next several years, the country is likely to need foreign

credits in larger quantities than it has traditionally borrowed. The fall

in coffee prices and the expected slow growth in crucial private investment

in manufact:uring, with resulting limited prospects for accelerating somemanufactured exports, means that El Salvador will be a foreign exchange

constrained economy over the next few years. Our balance of payments and

growth projections indicate that the debt service ratio could rise to about

13 percent by the mid-1980s because of the increased borrowing. While the

relative share of commercial borrowing is expected to increase, our projec-

tions also expect an acceleration in El Salvador's total borrowing frommultilateral and bilateral lenders. In view of the low level of external

debt and debt service, El SaLlvador is considered to be creditworthy for

this additi.onal borrowing.

20. Nievertheless, the serious imbalance between limited natural

resources and continued rapid population growth, the substantial rural

and urban poverty, the strorLg dependence of the industrial sector on

imported inputs, and problems in developing dynamic manufactured exportslimit the country's capacity to borrow abroad on conventional terms and

indicate the need for as much long-term and official finance as can be

marshalled. Under these circumstances, if domestic savings--which at 19

percent of GDP in 1976-78 are relatively high for a country of El Salvador's

income level--are to be complemented by a reasonable proportion of external

capital at the same time as social projects with a low foreign expenditure

component are undertaken, of:ficial external assistance in excess of the

foreign exchange component of individual projects is called for.

PART II - BANK GROUP OPERATIONS

21. El Salvador has to date received eighteen Bank loans and four IDAcredits totalling US$216.4 million. Annex II contains a summary statement ofBank loans, IDA credits and IFC investments as of April 30, 1979, and noteson the execution of ongoing projects.

22. At the end of 1977 the Bank Group held 28.2 percent of the US$265.9million external public debt outstanding and disbursed repayable in foreigncurrency. The Bank Group's share of total public debt service in 1977 was9.3 percent, and is expected to remain about the same through the mid-1980s.

23. In the past, the Bank Group assisted El Salvador in the developmentof its infrastructure, through projects in highways, power and telecommunica-tions. Together with IDB and CABEI, the Bank assisted the development of ElSalvador's arterial highway system. A close relationship has evolvedbetween the Bank and El Salvador's public power agency, Comision Ejecutivadel Rio Lempa (CEL), since its establishment, enabling the Bank to contributesignificantly to the institution building efforts of CEL management.Similarly, the Bank's efforts to strengthen the institutional capacity ofthe national telecommunications agency (ANTEL) have helped improve itsorganization, and facilitated the rapid expansion of the agency's services.

24. Bank Group lending for the social sectors has been much less thanthat of IDB and USAID, principally because of the Salvadorian's preferencefor the softer lending terms offered by these agencies. Nevertheless, theBank Group is now playing an important role in the social sectors and four ofthe six most recent operations have been for education and urban development.Projects currently under consideration for Bank loans include urban development(squatter upgrading, serviced sites, small business credit) and urban watersupply and sanitation. These projects would help El Salvador develop a broadprogram of urban improvement addressed primarily to the lowest income groups.In addition, the Bank Group is considering projects which would help to meetthe growing requirements for industrial development and employment. Projectsin these sectors include port and freight terminal development, geothermalpower, road maintenance and industrial credit. The Government has so far metits requirements for external finance for agriculture and rural developmentlargely through loans from IDB and USAID. Nevertheless, the Government'sinvestment program provides for an expansion of its activities in theseareas, and the Bank has begun considering the possibility of loans for feederroads and rural development in the economically depressed north-eastern partof the country.

25. IFC has made two investments in El Salvador. The first aUS$140,000 loan made in 1959 to Industrias Textiles, S.A., has been fullyrepaid. The second, a US$233,000 equity investment and US$600,000 loan toHoteles de Centroamerica, S.A., in 1969, was for a hotel project that wascompleted in 1972. IFC is exploring possibilities of additional investmentsto encourage private enterprise in El Salvador.

PART I:'I - THE EDUCATION SECTOR

Background

26. The high rate of growth and the young age structure of the popula-

tion of El Salvador necessitate a rapid expansion of educational opportuni-r

ties to prepare new entrants into the labor force for employment in a modern

environment. In the last 25 years the population has doubled and the

proportion uander 15 years of age increased from 43 percent to 46 percent.At present, about 38 percent of the population 10 years or older is illi-

terate. Illiteracy is particularly high in the rural sector (51 percent)

and, together with the low level of educational attainment, constitutes a

barrier to the diffusion of modern techniques in agricultural and livestock

production. There is a large and growing need to expand formal as well as

non-formal education particuLarly in the rural areas.

The Formal Education Sector

27. The formal education system includes nine years of basic education

equally divided into three cycles; and three years of diversified secondary

education (grades 10-12) which permits specialization in academic or various

vocational subjects. Higher education is provided by two autonomous univer-

sities, one national and one private, and by various post-secondary institu-

tions. The Ministry of Education and Culture is responsible for administra-

tion of all levels except university education.

28. The Government began systematic planning of the development of

its education and training sector in the 1960s, with the adoption of the

(1968-72) First Education Development Plan. The First Plan had ambitious

aims: (a) restructuring of the education system to provide nine years of

basic education free of charge for every child, and diversified secondary

school programs rather than the traditional academic courses; (b) streng-

thening administration and education supervision; (c) providing low-cost

learning materials and introducing educational television; (d) rationalizing

the teacher training system; and (e) increasing educational opportunities

for the rural population. Although basic education expanded rapidly (6

percent per annum) under the First Plan, it covered only 65 percent of the

relevant age group (7-15 years) by 1972, and the imbalance in educational

opportunities between urban and rural areas was not corrected. Also, the

diversification of secondary education, the revision of curricula and the

provision of low-cost learning materials was not completed. Nevertheless,

basic improvements in the institutional framework for formal education were

established with the regionalization of school supervision, the introduction

of educational television, and the establishment in the Ministry of Educa-

tion of the Technical and Pedagogic Studies Department, the Textbook Pro-

duction Workshop, and the Office of Planning and Coordination.

- 8 -

29. The Second Education Development Plan (1973-77) supported continua-tion of the reform measures introduced under the First Plan and containedsome new programs to meet the needs of the productive sectors and improve thequality and efficiency of the formal education system. Pursuant to this Plan,basic education opportunities in the rural areas were extended through con-struction of new schools and more efficient utilization of existing ones.Rural schools were converted into community learning centers to launch a basicskills training program for the rural population, and an accelerated basiceducation course was introduced for over-age students. In addition, practicalsubjects were introduced in basic education and the introduction of diversifiedcurricula into secondary education was completed.

30. Notwithstanding progress made under the Second Education Develop-ment Plan, there remain extreme disparities in access to education, andin efficiency, between urban and rural areas. In 1977, enrollment in basiceducation schools accounted for only 52 percent of the age 7 to 15 ruralchildren compared with 109 percent in urban areas (including over-agestudents); and only 19 percent of first grade entrants completed the sixyears of primary education in rural areas, compared with 47 percent in urbanareas. This imbalance can be attributed to the acute shortage of classroomsin rural areas, distances between rural schools, many of which offer fewerthan six grades; lack of well-prepared supervisors, directors and teachersfor rural schools; and shortage of teaching materials, including basictextbooks. Rural children also have very limited access to secondaryschools since those are concentrated in large urban areas.

31. While the lack of well-prepared teachers is particularly acute inrural areas, the low quality of the teaching force is a countrywide problem.The majority of the present teachers are graduates of teacher trainingcourses that, due to their inefficiency and unsatisfactory standards, werephased out in 1967 or consolidated into one large and well-staffed institu-tion (Ciudad Normal). Given the inadequate training of most of the teachersnow in the primary school system, an innovative, countrywide in-servicetraining program is being prepared, as well as improvements in the pre-service teacher training courses.

Government Priorities and Programs

32. On the basis of an AID-assisted sector study, the Government hasprepared its Third Education Development Plan (1978-82), which is geared toaddress some of the system's qualitative deficiencies and structural im-balances. The general objectives of the Plan will be to strengthen furtherthe formal education system, with particular regard to improved access tobasic education and to quality improvements at both primary and secondarylevels. The main thrust of the Plan, which the proposed Bank loan wouldsupport, will be to continue the expansion of basic education opportunitiesin rural areas through construction of new primary schools and more efficientutilization of existing ones. Specifically, the Government is planning:

(a) to construct new schools and replace inadequate existing

schools in the most disadvantaged rural areas so that by

1985 basic education will be provided to 89 percent of the

relevant age groups in grades 1-6 and 37 percent in grades

7--9 (compared with 70 percent and 8 percent for the same

grades in 1977);

(b) to implement in alL rural schools a double shift system and

multigrade teaching, thereby increasing the number of stud-

ent places and usinig teachers more efficiently, and, by

providing an opportunity for additional pay, helping assure

the availability of sufficient competent teachers for rural

schools;

(c) to carry out a revised school nuclearization system, as

an approach to organizing and supervising rural education

to provide children with maximum access to basic education

and to integrate the schools into the community;

(d) to expand technological education at the post-secondary non-

university level to provide the growing industrial sector

with qualified technicians.

33. While the double shift system coupled with multigrade teaching

would make more efficient use of teachers, the student/teacher ratios would

decrease substantially, with the ratio dropping from the present 40-45 pupils

per teacher for a one-shift day to about 35 pupils per teacher per shift for

a two-shift day.

34. The Government has been experimenting with nuclearization of

rural schools since 1976; however, the 34 nuclei already established are

functioning with very mixed success because: (a) they were designed on

the assumption that large schools located at a central point would attract

children from surrounding communities, and this has not occurred since

walking distances are excessive; (b) appropriate training for teachers and

directors has not been provided; and (c) administrative and legal procedures are

not clearly defined. The Government is now developing policies and plans to

correct these deficiencies, and the proposed Bank project would support

these efforts. The plans call for a "central" six or nine grade school

linked to a number of neighboring schools offering either six grades

("subcentral" schools) or four grades ("associated" schools). The "central"

schools would offer formal primary education to school age children, ac-

celerated primary education to over-age students and non-formal training

courses (in agriculture, health, community development, home economics,

etc.) to out-of-school youth and adults. The "subcentral" schools would

provide the full six grades of primary education to communities located 10

to 15 kilometers from central schools; the "associated " schools would

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provide the first four grades of primary education to small communitieslocated within three kilometers of a central or subcentral school wherestudents might attend the fifth and sixth grades. Each "central" schoolwould have, in addition to classrooms, facilities for teaching scienceand practical subjects, a school library and an administration area, andall schools would have covered areas for community activities and a studentfood program. Some "central" school teachers would receive specializedtraining to carry out the non-formal training courses and would assist inorganizing community activities. The director of the "central" school wouldhave no teaching responsibilities, but would supervise teaching in thenucleus and serve as a liaison between the community and the non-formal andin-service teacher training institutions utilizing school facilities. Theimproved nuclearization system would be applied first in rural areas iden-tified as having the most acute need to expand and improve education oppor-tunities.

35. With respect to technological education at the post-secondarynon-university level, preliminary estimates of the demand for skilledworkers and technicians indicate that, during the 1978-1990 period, 700-900new technicians will be needed annually. In 1977 the two existing tech-nological institutions--Instituto Tecnico Centroamericano (ITCA) andInstituto Tecnologico de San Salvador (ITESS), both located in the SanSalvador area--graduated a total of only about 270 technicians. To helpclose the present gap between demand and supply of technicians, the Govern-ment plans to establish two institutes (in Santa Ana and San Miguel) andexpand ITESS to increase the total number of graduates by 400 per year.

Non-Formal Education and Training

36. Non-formal basic education is mainly provided by the Ministryof Education to out-of-school youths and adults through evening and ac-celerated courses and literacy training. The accelerated programs offeringbasic education through instructional television (ITV) lessons and writtenmaterials, are flexible courses given by regional counseling officers.

37. With respect to non-formal, work-oriented training programs,the Government has recognized the need to provide well-organized newtraining services for skilled or semi-skilled workers, and to provide thenecessary upgrading of the existing pool of manpower to enhance its produc-tivity and mobility. Accordingly, the Government in 1977 created a NationalVocational Training Council (NVTC), made up of the Ministers of Labor,Planning, Economy, Agriculture and Education, together with two representa-tives each of the employers and the trade unions. To assist the Council, afull-time Technical Committee was set up with representatives from each ofthe aforementioned ministries. Major spheres of responsibility have beenestablished, with the Ministry of Labor now responsible for all industrialtraining for skilled occupations in the organized modern sector, the Ministryof Economy for management training and the Ministry of Agriculture foragricultural training and the diffusion of modern technology to farmers.The Ministry of Education's role under the new system is to undertake

- 11 -

non-formal basic training for the urban and rural poor. In the 1978-82

period, the Government plans to provide training through short courses to

approximateLy 12,000 small- and medium-size farmers and almost 6,000 indus-

trial workers per annum (partially filling the projected gap of 15,000

industrial workers per annum). In addition, almost 4,000 rural and urban

poor per year will receive basic occupational skills training.

Education Finance

38. Public basic education in El Salvador is free and tuition fees for

public secondary and higher education are low. To equalize opportunities,a system of loans financed by a fund in the Central Bank has enabled low-income students in secondary and higher education to finance living expenses.

39. In 1977 total expenditures for education (current plus capital)

are estimated at US$123 million or 4.3 percent of GDP. Of this amount, the

Central Government contributed about 90 percent. Public expenditures for

basic education represent the bulk of education expenditures (64 percent of

recurrent expenditures for education), a clear sign of the high priority the

Government assigns to basic education.

40. Foreign assistance to education in the form of loans and grants has

been provided by: (a) USAID, supporting mainly ITV, curricular and adminis-

trative improvements, the construction of basic education schools and occupa-

tional skills training for tlne urban and rural poor; (b) the Bank, supporting

the expansion of secondary education, basic rural education, and agriculturaland industrial training through three projects; (c) IDB, supporting the expan-

sion of the autonomous university; and (d) UNDP, which has provided technical

assistance for the educational sector.

41. Government authorities are now faced with the difficult problem of

expanding e,lucation opportunities and improving the quality and relevance of

the system at a time when a significant proportion of the Government budget

is already being spent on education. The 1978-82 Education Development Plan,

therefore, gives emphasis to efficiency and unit-cost reductions. The double

shift system will allow teacher workload, which under the one shift system is

light, to be increased, with additional hours being paid at half the regular

hourly rate. This measure is facilitated by ITV which releases teachers frompart of their active teacher tasks. Unnecessary recurrent expenditures will

be avoided with the selectivie replacement of classrooms which are rented or

are too small, leading to uneconomically low pupil-teacher ratios.

42. Given the cost savings expected to arise from these measures, the

financial impact of the overall education program, of which the fourth proj-

ect is a part, is relatively modest. While El Salvador's central government

education expenditures (current plus capital) rose from 2.5 percent of GDP

in 1963 to about 4.0 percent in 1977, the amount of these expenditures as a

percentage of GDP is expected to decrease somewhat through 1985. The

education program supported by the project should not give rise to budgetary

problems or serious conflicts with other expenditure programs since Central

Government revenues, in the next few years, are expected to increase more

rapidly than GDP, recovering from the unusually low levels of 1978 (see

paragraph 14 above).

- 12 -

Prior Bank Education Projects

43. Under the first Bank loan (Loan 609-ES of US$4.9 million equivalent)signed in June 1969, the Bank supported implementation of those portions ofthe First Education Plan related to development of formal secondary, agricul-tural and technical education and the reorganization of the formal educationsystem. As noted in the Project Completion Report (PCR), the project, whichwas completed in December 1974, had a significant impact on the developmentof public secondary education in El Salvador (with project schools accountingfor 40 percent of all public secondary enrollments and instructional and learn-ing materials developed under the project reaching 61 percent of the publicsecondary school population). Less successful were the efficiency objectivesof the project, with unit recurrent costs exceeding estimates (because of poorutilization of some facilities), the teacher training programs falling shortof the original objectives (because of the lack of specialists' services andunderutilization of fellowships), and enrollment in the agricultural and indus-trial post-secondary schools and the industrial and agricultural sections ofthe secondary schools being lower than anticipated. The conclusions of anaudit report prepared by Operations Evaluation Department and distributedto the Executive Directors on June 21, 1977 1/, were similar to those of thePCR. In view of the foregoing shortcomings, in the proposed project specialattention has been paid to the intensive utilization of facilities and tothe provision of an adequate level of specialists' services.

44. The project financed by the second Bank loan (Loan 1007-ES ofUS$17.0 million equivalent) signed in June 1974, is supporting the SecondEducation Plan objectives of expansion of basic education and trainingopportunities in rural areas. The second project, which like the first isbeing implemented by the Ministry of Education, includes establishment ofrural basic schools offering a variety of education and training activitiesfor youths and adults and initiation of a mobile, non-formal rural trainingpilot scheme. This project has suffered implementation delays of about threeyears for a number of reasons: (i) high turnover of staff in the implement-ing agency, the Directorate of Educational Architecture (DAE) and the factthat DAE was given responsibility for a steadily increasing number ofactivities outside the scope of the project, (ii) lack of coordination amongDepartments of the Ministry, (iii) shortage of construction materials, (iv)difficulties in site selection and acquisition, and (v) undercosting of someproject elements during appraisal and cost escalation that have caused asubstantial project cost overrun (43 percent). Most of the problems delayingimplementation of the second project have now been overcome with the estab-lishment of a new project implementation unit with responsibility solely forthe execution of the project and the contracting of outside consultants toassist the unit on site selection, design, construction supervision and costcontrol aspects of the project. The scope and size of the project have beenmodified and the Government's project targets adjusted to reflect fundingavailabilities (some 49 schools have been transferred to the fourth project).At the same time, the Government has requested UNDP to finance an evaluationof the administrative structure of the Ministry of Education, with particularattention to be given to DAE.

1/ Sec M 77-518.

- 13 -

45. The 280 schools that have been completed under the second projectare well staffed and are operating satisfactorily. Of the 234 schoolsremaining to be completed under this project, 96 are under construction andscheduled for completion by October 1979; bid documents are being preparedfor 60; sities are available Eor 37 and being selected and acquired for 41.Construction of all schools :is expected to be completed during the firsthalf of 1980. Given the advanced stage of implementation now achieved underthe second project, the project unit has already begun site selection forthe first group of schools to be included in the fourth project, in order toallow construction to begin in the latter part of 1980. Thus, the proposedloan would provide the financing necessary to help the Government maintainthe recently acquired momentum necessary for meeting its objectives ofextending basic education oplportunities to the rural areas. In view of thesecond project's shortcomings, special attention has been given in theproposed project to strengthening the capacity of the project's implementingunit, to site selection and acquisition, and to reducing construction costs,whenever possible.

46. The project financed by the third Bank loan (Loan 1571-ES of US$9.0million equivalent) signed in June 1978, and declared effective in October1978, is assisting the Government in establishing a nationwide institutionalstructure for non-formal agricultural and industrial training to help meet therequirements for technical manpower and to increase the productivity and incomeof small and medium-size farmers, agricultural workers, unskilled, semi-skilledand skilled industrial workers, their supervisors and managers, and small- andmedium-scal,e enterpreneurs. The Ministries of Agriculture, Labor and Economyare responsible for project implementation, which so far is being carried outsatisfactorily.

PART IV - THE PROJECT

47. A report entitled "Staff Appraisal Report - Fourth EducationProject", No. 2458a-ES, dated May 21, 1979, is being distributed separately.Project preparation was compLeted by the Ministry of Education in September1978. Annex III contains a timetable of key events in processing the projectand a description of the special conditions of the proposed loan. Negotia-tions were held in Washington on May 10 and 11, 1979. The principalrepresentative of the Govermnent was the Vice Minister of Education,Mr. Juan Jose Bonilla.

Objectives and Composition

48. The fourth project is designed to support the Government's highpriority educational investmient programs included in the 1978-82 ThirdEducation Development Plan. The project would assist the Government in:

(a) expanding basic education and training opportunities for children andadults in rural areas by establishing 50 rural basic education nucleicomprising 356 schools; (b) improving the quality and efficiency of ruralschool administration and supervision through the establishment of animproved school nuclearization system; (c) expanding in-service training

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programs for basic education teachers and school directors; (d) expandingthe production of textbooks and teaching material for basic education; and(e) establishing a new post-secondary technological institute to increaseopportunities for training of technicians in selected priority specializa-tions needed for the country's industrial development. USAID will also beassisting the Government in expansion of rural basic education through arecent loan (signed March 21, 1979) for the amount of US$4.4 million; theUSAID project was designed in close coordination with the Bank and wouldcomplement the fourth project through the provision of technical assistancefor pre-service training of rural teachers and the financing of upgradingand expansion of existing rural primary schools.

49. Specifically, the fourth project would include:

(a) construction, equipping, and furnishing of 54 new schoolsin small rural communities of which 49 would offer the firstfour grades of basic education ("associated" schools) and5 would offer six grades of basic education ("subcentral"schools), with a total aggregate capacity of about 4,500new student places;

(b) construction, equipping and furnishing of 191 schools whichwill replace unsuitable schools or upgrade and expand exist-ing schools, of which 85 would be "associated" schools, 56"subcentral" schools and the remainder "central" schools(offering either six or nine grades of basic education),with an aggregate capacity of about 26,000 new and 16,420replacement student places;

(c) equipping and furnishing 111 schools of which about 24 wouldbe "associated schools," 65 "subcentral" schools and theremainder "central" schools (when expanded in the future)with an aggregate capacity of about 22,400 student places;

(d) expansion and upgrading of the in-service teacher trainingprogram as follows: (i) equipping and furnishing of thenew facilities being constructed at the National TeacherTraining School (Ciudad Normal) under the Second EducationProject and construction of new office and storage spacefor the in-service teacher training program; (ii) provisionof supplies for the production of teaching materials inconnection with the in-service teacher training program;

(e) production of textbook and teaching materials including:(i) preparation, distribution and evaluation of new text-books; (ii) materials for and printing of about one mil-lion basic education textbooks and teaching guides; (iii)construction and equipping of a building to house theMinistry's Textbook Division;

(f) construction, equipping, and furnishing for a new post-secondary technological institute in San Miguel with atotal capacity of about 240 student places; and

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(g) technical assistance to the Government for projectimplementation and evaluation, improvement of schooladministration and supervision, curriculum develop-ment, textbook production, in-service teachertraining, and curriicula preparation for the techno-logical institute.

Detailed Features

50. Basic Education. This project element would assist the governmentin establislang 50 rural basic education nuclei comprising 158 "associated",126 "subcentral", and 50 "central" schools and equipping 22 schools which,when expanded in the future, would be converted to "central" schools. In1984, when project facilities are expected to be in full operation, about90,000 studients would be enrolled in project schools (19 percent of totalrural enrollment projected by 1984).

51. In addition, some 12,500 adults and out-of-school youths wouldreceive literacy and accelerated basic education courses, as well as non-formal training courses, at the central schools. The non-formal adult trainingcourses would be designed to improve agricultural productivity and thequality of life in each community. Instructors for these non-formal courseswould be volunteers selected from the most capable local workers and primaryschool teachers assigned to central schools, who would receive specialtraining provided by the National System of Agricultural Training (CENCAP)and the Vocational Training Centers of the Ministry of Labor, being estab-lished under the Bank's third education project. In addition, centralschools would be made availalble to other training agencies of the Governmentto carry out specific programs for rural community development. Centralschools would be used during weekends by teachers of nuclei schools takingin-service training courses using distance-learning techniques. The Govern-ment has agreed that by June 30, 1981, it would take the necessary action,including enactment of regulations, to organize and administer the basiceducation school nuclearization system in a manner satisfactory to the Bank(Loan Agreement, Section 4.03). The director of each central school would beresponsible for the supervision of all schools within the nucleus and wouldalso serve as liaison between the community and the non-formal trainingagencies. Given the pivotal role of the director and teachers of eachnucleus the Government has agreed that it would (i) select directors who aregraduates of teacher training programs specifically designed for this purposeand provide the directors with salaries at the level of "unified schooldirector"; and (ii) staff project schools with qualifid teachers who havesuccessfully completed in-service training courses on rural communityeducation, including multigrade teaching techniques (Loan Agreement, Section3.06).

52. Ihe Government's strategy is to assign new graduates of teachertraining programs to rural areas for the first three years and to havethe majority of, or all, rural teachers work two shifts and receive adequatemonetary cc,mpensation for the second shift. In addition, the Government hasprovided housing for rural teachers. During the past five years this

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strategy has attracted qualified teachers to rural areas. However, becauseof the expense involved in providing housing, the Government has now decidedto review this policy and is exploring the possibility of helping teachersacquire their own houses in a community by making available to them loans onfavorable terms.

53. Teacher Training. With the support provided under the proposedproject, the Ciudad Normal would be equipped to train annually about 550 newteachers, or about 75 percent of the total teacher demand; the remaining gapof 180 teachers would be provided from other existing public and privateteacher training schools.

54. The in-service teacher training program would reach about 10,000primary school teachers (70 percent of the total) with 6 to 20 years ofteaching experience. This program would utilize distance-learning tech-niques, including printed materials and lessons provided through the Ministryof Education's ongoing television and radio programs. A teacher whocompletes the program would be eligible for a promotion certificate and asalary increase. Tutorial staff (supervisors, secondary school teachers,educators in the Ministry of Education, staff of Ciudad Normal), contractedon a part-time basis, would assist trainees in mastering the course contentand would be responsible for conducting periodic examinations. Six man-yearsof specialist services in distance-learning techniques, module developmentand program evaluation, and four man-years of fellowships for trainingabroad would be provided. Ciudad Normal would also provide training coursesfor 50 directors, 50 industrial arts teachers and 50 home economics teachersrequired for the central schools of the project's basic education nuclei.

55. Textbook and Teaching Material Production. Promotion of new text-books would be by means of the ITV network of the Ministry of Education, radioprograms and posters. A program to train teachers in the use of textbooks hasbeen designed and would be implemented by the in-service teacher trainingunit at the Ciudad Normal. Two man-years of specialist services and sixman-years of fellowships for training abroad would be provided for textbookproduction. During 1981-83, under this program, all rural students and about20 percent of urban students in grades 1-6 would be provided with textbooks,which would be lent to them by each school. (It is expected that the balanceof urban students would be able to purchase textbooks.) The Government hasagreed that: (a) it would appoint professional staff (one general coordinatorand 16 textbook writers) satisfactory to the Bank by January 31, 1980 (LoanAgreement, Section 3.07a) and (b) it would undertake by December 31, 1982, anevaluation study, acceptable to the Bank, on student performance and achieve-ment for selected subject areas (Loan Agreement, Section 3.07b).

56. San Miguel Technological Institute. The Institute would train,in a two-year course, technicians in the following specializations, which atpresent are not offered in El Salvador: (a) agroindustry, (b) industrialmaintenance, and (c) production and quality control. Yearly output would beabout 110 technicians. Technical assistance specialists would help thestaff of the Department of Higher Education of the Ministry of Education in

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preparing tlne curriculum for each specialization to be offered. The curri-cula would be designed in close consultation with industrialists to assurethat the content of the courses is relevant to the job market. In addition,the curricula would have a modular structure, to help students leavingschool before the end of the two-year course find employment as assistantindustrial technicians and to facilitate their return to the Institute tocomplete the full course. Wlen in full operation, the institute wouldrequire a teaching staff of about 30. General education teachers would beselected from the better qualified secondary school teachers, while teachersfor technical courses would Tbe employed on a part-time basis from industryand from the Central American Technological Institute (ITCA). In additionto four man-years of specialist services for curriculum preparation, oneman-year of specialist services would be provided to assist the Governmentin establishing a tracer and evaluation system, and one man-year of fellow-ships for training of instructors abroad. The Government has agreed to takeall necessary measures, satisfactory to the Bank, to attract qualifiedstaff for the San Miguel technological institute (Loan Agreement, Section4.04). Also to ensure that the courses offered at both the new San MiguelInstitute and other post-secondary technical institutions are responsive andrelevant to job market needs, a student tracer and education evaluationsystem would be established by June 30, 1981, for each of the post-secondarytechnical institutes in the country and the data collected would be used inadjusting courses to job market needs (Loan Agreement, Section 4.06).

57. School Administration and Supervision; Curriculum Development.School supervision would be reorganized and strengthened in order to improveand extend basic education in rural areas and to ensure the successfulestablishment of the school nuclearization system. The project wouldprovide three man-years of specialist services in school nuclearization,administration and supervision and about 15 vehicles for central and zonesupervisors to help carry out this task. Implementation of this new systemwould require revision of existing regulations as well as adjustments ofbudgetary allocations. The Government has agreed that by June 30, 1981,such action would be completed (Loan Agreement, Section 4.07). Five man-years of specialist services in basic education curriculum development,education t:echnology, research and evaluation, student guidance, and fourman-years of fellowships for training abroad of key staff responsible forcurriculum development would be provided.

Cost and F:Lnancing

58. The total project cost is estimated at the equivalent of US$33.6million, including contingencies of US$8.6 million (of which US$6.0 millionis price contingencies). A breakdown of costs by project component is con-tained in the Loan and Project Summary at the beginning of this report. Theproposed US$23.5 million Bank loan would finance 70 percent of project costsand would cover the foreign exchange costs of US$14.0 million, and US$9.5million of local costs. Local currency financing is justified on countrygrounds, as discussed in paragraph 20 above. The US$10.1 million balance

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of the financing for the project would be provided by the Government. Atotal of 21 man-years of specialist services and 15 man-years of fellowshipsfor training abroad would be provided at an estimated cost of US$50,000 perman-year of specialist services and US$10,000 per man-year of fellowships.

Project Implementation

59. Project administration and execution would be the responsibility ofa Project Coordinating Unit recently established under the Mlinistry of Educa-tion to improve the implementation of the Second Education Project (paragraph44 above). The unit is headed by a general coordinator, who is assisted byan educator, two architect/engineers, a procurement officer, an accountant,and support staff. Consultants, satisfactory to the Bank, would be appointedto assist the unit in site selection and evaluation, architectural design,preparation of relevant bid documents and bid evaluation and constructionsupervision. Due to the existing trend pointing to excessively highconstruction costs for rural basic education schools in El Salvador, consul-tants acceptable to the Bank would also be appointed to assist the ProjectCoordinating Unit in conducting a study to determine ways of reducingconstruction costs for such schools. This study, to be completed by December31, 1979, would determine the feasibility of introducing preassembled systemsfor onsite erection of classroom modules, community participation in schoolconstruction, etc. The Project Coordinating Unit, with the assistance of therelevant Departments of the Ministry of Education, would review and evaluatearchitectural designs, equipment and furniture lists and specifications,textbooks and teaching material production, to ascertain that these meeteconomic and functional standards as well as the educational objectives ofthe project. Furthermore, to ensure that the physical facilities and theeducational objectives of the project are being implemented as envisaged,the Government has agreed to undertake an annual audit of the completedproject institutions and to submit such audit reports to the Bank for reviewnot later than January 31 of the following year (Loan Agreement, Section 3.08).In order to assure adequate funding for maintenance and operation of projectinstallations, the Government has agreed to make annual budgetary appropriationsequivalent to the aggregate of at least 1 percent of the construction cost and5 percent of the cost of equipment and furniture of the completed project schools(Loan Agreement, Section 4.08). Finally, as USAID is financing complementaryinvestments in basic education and pre-service teacher training, closecoordination will be maintained between USAID and the Bank during projectimplementation.

60. The Project Coordinating Unit has so far selected over 50 sitesfor the first group of schools to be included in the project. A specialcondition for the disbursement for expenditures for civil works and equipmentfor new and replacement rural schools would be the acquisition of 65 sitesand selection of another 35 sites for project schools (Loan Agreement,Schedule 1, paragraph 4(b)).

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Procurement and Disbursement

61. Civil works under this project are unlikely to attract foreigncontractors due to (a) the sraall size of most schools and (b) their remoteand scatter,d locations. There exist a number of small- to medium-sizedlocal building contractors whio are adequately equipped and administrativelycapable of undertaking the construction works. All construction contracts.would be awarded on the basis of competitive bidding advertised locally andin accordance with procedures acceptable to the Bank; however, interestedforeign contractors would not be precluded from bidding.

62. Contracts for furniture and equipment would be awarded on thebasis of international competitive bidding in accordance with the Bank'sguidelines. However, items that cannot be grouped into packages of at leastUS$50,000, or are produced by the Ministry of Education Center for theProduction of Teaching-Learning Materials (CREA), would be procured throughlocal procedures acceptable to the Bank. Procurement under these localprocedures would not, in aggregate, exceed US$600,000 equivalent (correspon-ding to about 10 percent of estimated total cost of furniture, equipment,textbooks and other teaching material). In accordance with the CentralAmerican Agreement on Fiscal Incentives for Industrial Development, suppliersfrom the Central American Common Market (CACM) countries would receive apreferential margin in bid evaluation equal to 15 percent of the c.i.f. costof imports, or 50 percent of the tariff payable by non-CACM manufacturers,whichever is lower.

63. To facilitate the timely availability of local counterpart fundsand prompt payment to local contractors with limited working capital, theestablishment of a project implementation fund of at least US$400,000equivalent, to be administered by the Project Coordinating Unit, would be acondition of effectiveness (Loan Agreement, Section 5.01).

64. The loan would be disbursed over a four-year period. Disbursementwould be made for 53 percent of the total expenditures for civil works andprofessional services; 100 percent of foreign expenditures for imported, or 85percent of the cost of locally procured, equipment, furniture, textbooks andteaching materials; 100 percent of the cost of technical assistance and fellow-ships abroad; and 50 percent of salaries for project administration, teachertraining and textbook production staff. An amount not exceeding US$300,000would be disbursed retroactively to finance the construction and equipping ofthe Textbook Division faciliLties, and professional fees and other expendituresrelated to project implementation incurred after November 1, 1978.

Project Benefits and Risks

65. This project would contribute substantially to supporting Govern-ment efforts to increase the coverage of basic education in rural areas andtrain needed industrial technicians in a manner which will make them moreresponsive to employment requirements. In addition, significant improvements

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in quality and efficiency of basic education schools would be derived fromthe introduction of an improved system of school organization and adminis-tration, the provision of more facilities for accelerated and literacy courses,better pre-service and in-service training of teachers, directors and super-visors, and adequate provision of textbooks and other teaching materials.

66. No major risks are foreseen in the staffing of project ruralschools with qualified teachers, due to the Government policy of improvingtheir conditions of service. The most serious risks associated with theproposed project would be possible delays in execution due to administrativeproblems which have hampered the second project, i.e., frequent changes inhigh level personnel, and lack of coordination among Ministry of EducationDepartments. Conscious of this, the Government has taken corrective steps.It has (i) requested UNDP financing for technical assistance to evaluatethe administrative structure and procedures of the Ministry of Education andto make recommendations for improving its efficiency; and (ii) established aProject Coordinating Unit staffed with competent professionals (assisted byconsultants) whose main function will be to cut through the customarybureaucratic red tape and ensure the prompt completion of each consecutivestage of the project. A second risk is that available counterpart fundsmight fall short of the estimated requirement. While no major fiscal diffi-culties are expected in the next few years, the total amount of budgetaryresources required for the Government's education program will be substantial(as discussed in paragraphs 38-42 above). This financial risk would be reducedby the establishment of a project implementation fund, which would be acondition of loan effectiveness.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

67. The draft Loan Agreement between the Republic of El Salvador andthe Bank and the Report of the Committee provided for in Article III, Section4(iii) of the Articles of Agreement of the Bank are being distributed to theExecutive Directors separately.

68. Special conditions of the proposed loan are listed in Section IIIof Annex III. A special condition of effectiveness would be the establish-ment of a project implementation fund. A special condition for the disburse-ment of expenditures for civil works and equipment for new and replacementrural schools would be the acquisition of at least 65 sites and the selectionof an additional 35 sites for construction of project schools.

69. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.

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PART VI - RECOMMENDATION

70. I recommend that the Executive Directors approve the proposed loan.

Robert S. McNamaraPresident

Attachment

June 8, 1979

- 22 - Annex IPage 1 of 5

TABLE 3AEL SALVADOR - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AVERAGESEL SALVADOR Ia

LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)TOTAL 21.0 SAME SAME NEXT HIGHERAGRICULTURAL 13.4 MOST RECENT GEOGRAPHIC INCOME INCOME

1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e

GNP PER CAPITA (US$) 200.0 320.0 570.0 1066.7 432.3 867.2

ENERGY CONSUMPTION PER CAPITA(KILOGRAMS OF COAL EQUIVALENT) 127.0 192.0 248.0 911.1 251.7 578.3

POPULATION AND VITAL STATISTICSTOTAL POPULATION, MID-YEAR

(MILLIONS) 2.4 3.4 4.3URBAN POPULATION (PERCENT OF TOTAL) 38.5 39.0 39.4 57.9 24.2 46.2

POPULATION DENSITYPER SQ. KM. 114.0 162.0 205.0 25.6 42.7 50.8PER SQ. KM. AGRICULTURAL LAND 190.0 273.0 321.0 77.6 95.0 93.3

POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 44.8 47.5 46.1 42.0 44.9 42.9

15-64 YRS. 52.0 49.4 50.4 52.2 52.8 53.565 YRS. AND ABOVE 3.2 3.1 3.5 3.7 3.0 3.5

POPULATION GROWTH RATE (PERCENT)TOTAL 2.7 3.5 /f 3.1 2.7 2.7 2.5URBAN 3.3 3.7 3.4 4.3 8.8 4.7

CRUDE BIRTH RATE (PER THOUSAND) 48.5 46.1 42.2 35.8 42.2 37.8CRUDE DEATH RATE (PER THOUSAND) 20.1 14.3 11.1 9.1 12.4 10.8GROSS REPRODUCTION RATE .. .. 3.0 2.6 3.2 2.5FAMILY PLANNING

ACCEPTORS, ANNUAL (THOUSANDS) .. 6.4 43.9USERS (PERCENT OF MARRIED WOMEN) .. .. 10.4 15.1 14.2 20.0

FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION

PER CAPITA (1970=100) 104.1 100.0 109.7 102.1 104.3 107.3

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 82.0 79.0 84.0 103.9 99.5 105.3PROTEINS (GRAMS PER DAY) .. 43.0 50.3 60.3 56.8 63.0

OF WHICH ANIMAL AND PULSE .. 10.0 19.9 26.7 17.5 21.7

CHILD (AGES 1-4) MORTALITY RATE 17.5 11.1 7.1 8.7 7.5 8.0

HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 58.5 65.0 .. 62.6 53.3 57.2INFANT MORTALITY RATE (PERTHOUSAND) .. .. .. 56.9 82.5 53.9

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL .. 40.0 53.0 60.7 31.1 56.8URBAN .. 71.0 89.0 78.0 68.5 79.0RURAL .. 20.0 28.0 34.9 18.2 31.8

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL * 37.0 39.0 61.1 37.5 30.9URBAN . 66.0 71.0 80.3 69.5 45.4RURAL . 18.0 17.0 25.4 25.4 16.1

POPULATION PER PHYSICIAN 4630.0 / 3920.0 3970.0 1899.3 9359.2 2706.8POPULATION PER NURSING PERSON 1400.0 930.0 860.0 1220.1 2762.0 1462.0POPULATION PER HOSPITAL BED

TOTAL 460.0 500.0 .. 422.3 786.5 493.9URBAN .. 230.0 250.0 258.2 278.4 229.6RURAL .. .. .. 2281.6 1358.4 2947.9

ADMISSIONS PER HOSPITAL BED .. 31.0 34.0 25.6 19.2 22.1

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL .. 5.2 .. 5.2 .. 5.2URBAN .. .. .. .. .. 5.0RURAL .. .. .. .. .. 5.4

AVERAGE NUMBER OF PERSONS PER ROOMTOTAL .. .. .. 2.0 .. 2.0URBAN .. 3.8 .. 2.1 2.3 1.5RURAL .. .. .. 2.7 .. 2.7

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TOTAL .. 34.0 44.7 51.2 28.3 64.1URBAN 60.4 73.0 .. 77.3 .. 67.8RURAL .. 7.0 14.4 12.8 10.3 34.1

Annex I- 23 - Page 2 of 5

TABLE 3AEL SALVADOR - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AVERAGESEL SALVADOR la

- MOST RECENT ESTIMATE)SAME SAME NEXT HIGHER

MOST RECENT GEOGRAPHIC INCOME INCOME1960 /b 1970 /b ESTIMATE lb REGION Ic GROUP /d GROUP /e

EDUCATIONADJUSTED ENROLLMENT RATIOS

PRIMtARY: TOTAI 80.0 81.5 75.2 /h 103.5 75.8 99.8FE1tALE 77.0 70.0 69.0 102.9 67.9 93.3

SECONDARY: TOTAL 11.0 16.6 20.4 /h 37.2 17.7 33.8FEMALE 10.0 .. 17.0 37.9 12.9 29.8

VOCATIONAL (PERCENT OF SECONDARY) 30.0 31.0 58.0 14.7 7.4 12.8

PUPIL-TEACHER RATIOPRIMARY 37.0 37.0 43.0 32.8 34.3 34.9SECONDARY 15.0 25.0 .. 17.8 23.5 22.2

ADULT LITERACY RATE (PERCENT) 51.0 /i 60.0 62./jO 74.9 63.7 71.8

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION 8.0 10.0 11.0 26.9 7.2 12.4RADIO RECEIVERS PER THOUSAND

POPULATION 89.0 85.0 .. 173.5 71.1 104.5TV RECEIVERS PER THOUSAND

POPULATION 8.0 26.0 28.0 69.4 14.1 28.1NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTHOUSAND POPULATION 45.0 * 92.0 72.8 16.3 45.2CINEMA ANNUAL ATTENDANCE PER CAPITA 6.0 3.0 3.5 4.3 1.6 4.6

EHPLOYM ENTTOTAL LABOR FORCE (THOUSANDS) 810.0 1080.0 1130.0

FEMALE (PERCENT) 16.8 18.2 19.1 21.4 28.0 25.7AGRICULTURE (PERCENT) 60.0 56.1 55.0 37.8 54.1 46.2INEUSTRY (PERCENT) 17.1 19.7

PARTICIPATION RATE (PERCENT)TOTAL 32.3 30.7 30.9 30.8 37.8 33.8MALE 53.4 50.0 49.7 47.2 50.3 48.1FEMALE 11.0 11.3 11.9 13.2 20.9 17.3

ECONOMIC DEPENDENCY RATIO 1.7 1.6 1.6 1.7 1.3 1.4

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OP HOUSEHOLDS .. .. 38.0 1k 28.9 19.5 23.6HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. 67.0 /k 57.7 48.9 52.3LOWEST 20 PERCENT OF HOUSEHOLDS .. .. 2.0 Tk 3.2 5.9 4.3LOWEST 40 PERCENT OF HOUSEHOLDS .. .. 7.5 /k 10.7 15.7 13.1

POVERTY TARGET GROUPSESTIMIATED ABSOLUTE POVERTY INCOMELEVEL. (US$ PER CAPITA)

UR]IAN .. .. .. 251.9 155.9 191.9RURAL .. .. .. 200.6 97.9 193.1

ESTIMATED RELATIVE POVERTY INCOMELEVEL. (US$ PER CAPITA)

URltAN .. .. 176.0 403.1 143.7 319.8RUILAL .. .. 125.0 258.0 87.3 197.7

ESTIMATED POPULATION BELOW POVERTYINCOME LEVEL (PERCENT)

URBAN .. .. 18.0 24.8 22.9 19.8RURAL .. .. 70.0 65.2 36.7 35.1

.Noi: available

.Non: applicable.NOTES

/a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extremevalues of the indicator and the most populated country in each group. Coverage of countries among theIndicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1973 and 1977.

/c Latin America & Caribbeani; /d Lower Middle Income ($281-550 per capita, 1976); Ie IntermediateMiddle Income ($551-1135 per capita, 1976); /f Due to repatriation of Salvadoreans from Honduras,population growth rate is higher than rate of natural increase; /j 1963, Physicans in hospitals only;/h IBRD mission estimates; Neginning 1971, duration of secondary education was reduced from 6 to 3years, while primary education was extended by 3 years. Therefore data not comparable with those ofenarlier years; /i Aged 10 and over; /i Government estimate; /k Income recipients for San Salvadorun ly .

September. 1978

- 24 -

Anne-x IDEFUftTONP OF SOCIAL INICATORS Page 3 of 5

Motes- oltuougo the data ore drawn bun I ourcee generlly Judg.d ohs nest ahrta e .drlib, LIn should also bnocc chat ohny ray rot hb. tnn.sefulte Occacas f the Lck of eruderdind definitiOn .0d concepte used by different co-tIi.. in -11-cing th.. data. -h. d.ta re O theiLs-,

-fL de... iP. orde. fmanud,indi-ate trend.. an char-t-riati.. cartels major diff--eoe betwee c-unries

lh dl-std croceac-r.e.. for -ah'tdcae are PopuLarot1--alhtd geanic -mesa,-- excludn the aetre value of the irdic.toreed the roe populaItedetry L. each droup. Due to 1eck ci uata, groupaeae of LIl Winclltrn For Capital su-pl, O11 tEPrter and of indIcaor. of t-o..t .. oeter and .u...t.

disposl, (lou -, nn dilotib.ucio and Povety for other ..e.uty groups are poprl.tiom-Lcgbt.d S-trlc me.- aithout en-Iueon, of tha extreme . -eoe dtand most opulated o utry. Sincet. ocoErm o~f conetties aen the ldluet1rn oosd, vs - -eilablllt. of 'ai.e end Lacc ofm cauive -wa hencerc:ised

Ic n,a lu avrecs f _oeindicator to ethr ; hesh avrgsaemslP sfla tnaenaaivaofemsne"Ieun be cnae th J_ie o n

lopND AiEo ('ho..eend eq. Ics encai e ohyalcis, - PpupIlaio divided by -cbar of pr-tt blue phyei-ocai - ctet crface ree ounia iO landcone adI tn-ad osaeoaaqaiidfyA-sdloel ethool a ceortr ee.

Aor:o-lt-rl Mos't "I'llet otEmat. of agriulurl re . vd tmepo.raily Pouagnnr moals erm- popultion div~Idedk, teeIs of prat-cingccpretnl for cro_ps, pI..tuac , akot a-d kitchen gardens PI to aeadfml g.ad-te sra, Pracicl n-re end. a. itatn.

Ice fallow1. tnnasnio n hr slt hd rrl urban, and rural - ?opoeIon (totlurban, and raaidvie by their raap.-t- seeke of hospi-aI bed

ThP PER CuotroA <SI1) - GNf per capita -aettcte atcurrent narkt prica, nall I.e publio- ed pivate genera an1 d ep-ciall-d hoaplia1 ed rcacua IdM 7nm conar..os mthod as World Bank Atla A, 1975-77 basis); habilitaties center. 4oapitala r s -e bIncah -tea i permanety staffed by

1960. 1970, a-d 1977 data, as les ... t phytcin.. Etatbita -.c providing prt.innIpal cuam ialcar-ar max Inlded. Rural bhapLtai, h-Ios, nxunhatad d-II-

(NPI onfTyfON ?ER CAPITA - -tn.olocseption of nmecil oeg (coal ca ct.tr not permnetly staffed ho A peysiclan (btMyamdIca sand lgie arlat auoIgS.and hydro-, nulerad g-ntbetna altat, muaamdiafe, at..) obch Offar It-p.at le -c oindation aed

Llcrily)i ki1ogam Of coa eq.i-a en per capita. PI-'id. 5 Iisit.d ramge of medicat aclt1 sfld.eeiton pr hoepital bed - et-al number of aesosto or dia-harge

rOr11T.tLfIN cA ID O.coioIsfe heepieci dicided by the nt-e- Pi bed..:oci pouultion i-er nln)L - d. of lu1ip 1; 19h0, 1970, d1)77 1 dana. dt i mODS i

OrvoonoaIo (per.... I total)1 - vact of urban to ctal population; fceseiau hoshl ernacrhunld - oa.ta.artr1

-differen dfiton of irhaarv ryaff.nt -mp-raility of data baneghald coniee fMagrupo iniiul uohrolvn oacr

uevn ocnts.ad th.ir na L. le A boarda or lodger may or may no hecc ic.Idnd iO the

PP.pulaion P- h-.oh anagold fr at.tslti.lta ops

191c lpolroi-io by Aesad _e ad theLI rortaLinyadfrtty o ae e esi l, rdaa. ad r_.1 I--epindcovnIona dolIngrate. roetlu para-ter for mortaIty retee umeprisa of 3 tlevels rnpecsivly. pe-lli.g. anclade uo-pornm,a tutre anduucpid ar..seocing life eupectn .t uirth lceen ith curaPer capIta Alce-, tc elscni;ulrn foceto afivl-coa.uhe n uaIccon lnI.- and tamale life: soecany n :ifen t 77.5pae Convetina dwligswt a_iiit nliigqurasa.prenaoo

The paraisetore for fnrrilityracea. leo bae lve, asetala daoIitn ctot1, -rban, ond rurldmllgr.nciepIm fErtility .... ordiua C to. inom laai cad peer f-iliy pl .. nLog per-f.rma.c.. -ach c...utry I. thaoasga n ftas9ceiain 0CT~of -ornlity and arltlictY crade-for Pdrole 'tihnpuroe. Odut rroLLna ration

Scclnar tnlalc -Ina ruicac yPnlaInion, there icccgneh nmay uon toalml and fesai G-..s tuna1, tala and fnsa1a n--11l

Iqocn.lnhrtelsic to the deah rae,ad aa thage 'hno.alanea b prim lee -a-eretges of -espotti- prImaratrooerninaP coaatI. _hiaiaci evd nl atr fartiIity rast s~obol-age popeslatiom l umlly inclu,des ,hiidrnn uod h-i.y yers hut

declineto chnreplacnen t lvel ofunIt nt aPred-ttion rate, h-e e:th sdjaatd for dI,fferent lengtha of pimary ndc o;toroutruac with

de_r_sic P1 .anerpla..c its.El ... ectly. The Statio...ry ?Pupncltion _aivcea edu. tiL arulmn my .u.d lii0 Per...t abvi ne uli r_leu. aimatod_o to. busis of the prIso.tsdo aatritc f lbs helm or abor the uffinial achul ax..

nltu inthe Year 2000,..ad th. rat of denlim of ferniliry rets -sode col- eL. male and fee1l - Computed as above; aacondaryienco replaceeentlevel, ties rquires at leat four pars of approvd primar ins-truto;prode

Onto 3-t-OOno puc .o Ia ..aced - Th. year when Saniomary Popela- osarl oanonl.o cch,r nrainlag isa trot ices far pupi a1 -- usilv ofdon slue has hose rthed. 1to7yers-fa -l orepmd-ou cnr... are generaly ancluded

PSid-re- .vuaio Ia squar cil1-ter 1100 batrs ebid,lders,or othr pr_ga which opera.Vte Inpandetly cr as

Per 00. on. auricolroraI.lad - fuauted aaabev- fur ariulurl ad Punl=teche ra:tio -`rimare n a nsr ee`tdoe noldi

only. prisary asd .. condany lam.la ivided by eca Iar of tat..r I-in thecoreI ... a,i-e vun str- t-r (Percent) - Childrnn (i-lb ysara)t.a-kIng-.ge peig ees(t5_64 feas) ad .",ed f65 years and ocr) a. Per-eota.. of aid- tdclt literc ae(arot_ ireae ut (able tu reed end units)

osar population. * ~~~~~~~p-rteetcg of total adult 9puplarto aged 10 years and anPouato r_o rt t.ront .1caal-ad urban - Cunpeu..d annu-l

gr_eh _ac. of cora Iand urbansl-ys puuate ic 1950-60t, COllN" "IIR41960-70, and 1 7 7-P P..a-em rare lonr tho...d -ouain oane aecprise so1tr cars

Crude birth rats (ne th-.ad) -- tocol Line birth Per- thousad of entig en than eight pron;-nidsamuane.bera an uItemnid-year .populaion; 1)60, 1970 and 1907 data. rehicls.

Crud death rote loan tbh--ad) -Aoenoal deathe per nbthcaad of mid- RAdILo r.cainec Oep- nhvaaad ocpseatio) All typro of re..elcera for radioperpopulaion 1960, 1970 ad 1977 dana hrmed.. stgsnera public per th-wacdto aaaln nldcuico

rtererdvion rate.vereIe nosIe ofdagh tare aoeeat,ill baar receivers In countries and in yee whe- regis,trat-io cf rdoetse i

I Ive omlrproductive period If -seopriee resen - alffut; data forI reet years asy no be -oparabla iuc most c-lutrinspecific fertIilyrtss ....y iv-ya ...ege ening _19;69, absIghed lioeelng

reedy ntanntne-aconnrora auncal m (tca a- tca -eb-r of pcbltn per thoua-d populatton: aoue iolcce l eeursi oaocuytcre of hrnh-connrui deicee coder aceicca of national fanly trig. nd is years when rgietraLiun of IV ears Sh i efet.

pia-nl prgrm.tmerae circulaton (eec .hen,,nd eeulln - .Son Che a-raga ciroule-

F-oncy ...m cee'-usera inncet ofcrre 'en etnaef tI fdiynmrl eeecnm ee, daf ed oe "otcdlcI pcbl11carried conan of ohild-hoeniug ann 10-asia yaars) uhcee birt-cotr-l cation devoted primarily to reording genral nes.I LA -on idedtdeiest all mrid cnic sca age group. be "daIly' if it appear an Leat four time wek

Ohf000) AND N17RTIOy sold idurn h er nide disuc 0diet maadmbl

Per auct aunly of-clories f coron oi rosur L _ts _ on_td free tOfPdtPEl

enem eqlln of no foo uopplie available Lu c-iccy per capita "ca au crefbnedi-onmc"yntv een c-ncicdtn armdPor dan. -. eiabl. .:"pPIs cimPrna y t prdoutlo, L.P.--a I..a fneedunplyd bat encluding ho-asi-.e, -tde-t, etc. Dfloi-

empors, an ohanes itutou. Macuupples omlcd a Ima feed, needa, tna ia various rontiss ar ntoparahis.i.atttO sd1 in(o reuig d u.d I....e In diotribution. OR.F-femal (20ar...t) - F-als labor force a. perenag v tonal laurfooa

qormcswre -circ ted by FAOf oaad on phytong ra cee,de for o- OA-e-tsltc feprce.. - Laker fE-n In fatetlog, foretry hceriug and flehiecea civt n :1wth cneiderv atrsmnatepenr,bdasP- -tetao of llbor forte.

-sighta, age -ndadIa'rib-tlom of P.riafn,sd aLlowIng ii Per- Ind.atry fpr-et) - Labor fue in minig. -nsarnuclon canfatring aed

Intfr at t hooadnld level, elc_ct,otrad ga a :PerneageoI oa -. labr forc.P-r .1 roct eutely 01orei Zrmupr ay pruein nestofper Particltion rte I ,arn.... . _tte.J _vi acd iencas le- ta, ale ad

-pci- no -oPply tf rc per day. I.st a-,Pi of food is defined v(allarfotseper--tgna of cusirrepcIePup ro;16,17dov.Rnquconn for Iconrs -btlihed M SiA provide fu ed 1975 dan.t zh-sers ILOe aicexad paricIpa;tion ra_e fas_tng ge

L tiimc Mlloaeo7 ofOf naw oftoa rret Per day ond 2h gree sac structure of the polati, and 1ong curstred.00 uni-o -cd poio rnen of',I goo hud Me acm rten tonoi, depedeorti - canto of population nder 10 and v5 andovrt

23 goos of a-lna prutai oanorg for the ourid, pruponed by,100 in tieTIII cId fud Surrey. lN7Off D7ISTRIBIMON

fei c rta onel topi fon otia au rla - otuturly of food N cuaefvrIitoaeln (.Iot I .awh and kind, r roe... i, c Otctee h-derive iron almaicaed puces Ingran pon da. Pnroa t 2rcha lfper-n, poor-- 20 Percnt -ed p--ea 4d lenten

Child :-an t-a,) nort,lc ruts res ,,bnsdl . uu-cca de-tha per thoc- o oshatd on age group 1-4 .rear I, to ohildrIn in this we roup.

POVERTY TARG,~ GRPOIS

Life ooecatnoato h (rearm)-uvrg n rof yeara of life r-.ic- .bouepnrylne ee I.e L that Lne irvel,belwoil a1 inin.luIng at birthr 1960, 1970, and 1977 ata oItininly dequate dirt plow aantlno-food r-qoi-e-nr Ianu

on ea f age Prr t....aod Li-io_Lrhe.ltetdrltv ecety o L evel.- fUS oar tdia - bra-atra

SctA to cae .atr ...ce t of outt)-c aI.-ub-I- d -rur1 R.Ieti-e povety J-cor levL 1 on-third c crc e vpt etvNoutr of people (total, urban, and rurl) -. th reasonbleace P tim cof the -cunry.

caf one uupt lciueetrate srfce atocor tratd ht otccirdpoultlo hLe scoicrvooro ib..ce(e-d orr1-- ,ca -so.oroarnte ncrsctctht rm roacehvohtu.rrne. to P--ercec tio (.ta,rtana-d or.nauno.aacr

lv an u_ban AreuIpoblll ftu-tin~rstnp tLocatd .c. more thae170 otr tru __aicyheur Idored as etg aol t I r-a -nable

co c ftatMoe troroI a- w teao- bI cocdol oroottonhoconie o ember d.iteho bd vciec

0)5 rorot bace arta) (e ly 1 eotgtefitl ue ed cnncadScclC aZ-a tcrtodi--1Irre. o ooolt.otl od.adEcemcuavi ccPoao)n

ruo.Octoovsn -1oa ,orh-b o- or iSarObacat l- trt nod a nrotde o heir -epeciv pL catna nrt diapoa

-d rtideth oilci-nm -dcp , uish orilhouteosI to

Z-uut-etrv-dr-ontytn..thu. fcLtoo otci nmciLtos

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aa-.aa� �a-�a� �' Q-.Ozaacz,.c Oa-C-ta- aaa - a a- a aii a a-a aa-aazta.aa.. -a- a�a aaa-aac aaaaa aaa�%b a a- a aaaaa- a acaaa--.a? aza a a--a- aa a a a a a a a a a a a.-a a. aa � � Caaaaca C a aa�cC aa

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a- a-acaa-aaa

a- aaaa a za-:aaa- a- a a a a a a a a -a,' a a a a- a a- aa, a a-a a a-a-a- -.at a -a a a- -a- a a - a a-aa a a- a a-a- aata -a'aCa- -� -a- ' aa a a a a C a -a- �-a a aa a a a a a a a

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a -aaaaaa-aa - a aaa a-a-a- a 'a-a-az aa. -a-Ha-Ia- ' -a - a-az a aaa-a-aaaa-aa a -"a,-aaaa

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a a a a - - t-aaa a -a-a - a- a aaaacaaaaa - 'a-a -a aaaa-aaaaa -- aaa zac a -taaaaaaa-a- aaa'a,aa-'ac a." a.-aaa -a aaaaaa a - aaaaaaaaa a aaaaataaa a aaaaz aac a aaaaaaaaaaa -a---a- .1' i -,aaaa-a -a aa-aaaaa.a aaa-aaaaaa - a caaa- "a-a 'a¼

a-I,- 'aca-'aa a-a-aa�a 'a 'a' aa a a a - - t-aa-a aaaaa aaaaaaaaaaa aa 'a aaaaa-a a aaa-aa-a,a-a - aaaaaaa aa - a- - a�a ta-a aaa a - aci' a-a-ca-Ia-a- I a Ia- a aaaaaaaa a aacaaaa-aa -a a -,a" a-a - -,-, ' ' aaa aaa a-a--ii'a a. a 'a aaaaa-[a - -ala 'a-a--a-b4Z� "'a-a-kU a- a- ataaaaa -a aaa-aa..aca a t-aaaaaaa -a ai-aa aaa a aaaat-aaa.aa a

aaa � aat'taa-azaaaca-I -. a a a a a-a-a-a a-ca a-aataatttaa aa.a-a-�a,a' a a - a a aa.a�a a - a a- .. ,aaaa�aa,aaaaa aUk a-c-. a a a- a-a. a. at -a a a'a-i- 4' a-i 'a- -taaa.caa a acaaaaa--. a acaa aca a a a a a a a a a a -

Sa aaat aac -a-- a-a- a a a a c-aaaa -a aaaa-a a"- � - -- aaaa a--a a actazatacta 'a

- �.. ccc U'a a a a a -- aaaa - -aaa - a-. aaaaaa�aaaa -' -,aa'a-1a-� *o:fla�a,a - a caaaaaaaa - a aaat a-az 'a'a

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IS �S 'adaaa a- a- t Ia t a "a act- ca-c a aacc -a-cat

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n ~ ~ ~ ~ ~ ~ 0 0 0 0 00 0000 00_e 0 0e 0v OOt_:> o Os-o 00000 0

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- 27 -

ANNEX IIPage 1 of 3

STATUS OF BANK GROUP OPERATIONS IN EL SALVADOR(exclusive of exchange adjustment)

A. STATEMENT OF BANK LOANS AND IDA CREDITS(as of April 30, 1979)

Loan ------US$ million------or AmountCredit (less cancellations)Number Year Borrower Purpose Bank IDA Undisbursed

Twelve fully disbursed loans and credits 84.5 13.6

811 1972 ANTEL Communications 9.1 - 0.11007 1974 Government Education 17.0 - 10.5517 1974 Government Sites and Services - 6.0 0.71050 1974 Government Sites and Services 2.5 - 2.51288 1976, COMISION DEL RIO LEMPA Power 30.0 - 21.71289T 1976 Government Power 9.0 - 6.61465 197,' Government Urban Development 6.7 - 6.7726 1977 Government Urban Development - 6.0 4.91570 1978 ANTEL Communications 23.0 - 23.01571 1978 Government Industrial and Agri-

cultural Training 9.0 - 8.9190.8 25.6 -

Of which has been repaid 44.4 0.6

Total now outstanding 146.4 25.0

Amount sold 5.1of which has been repaid 4.1 1.0 -

Total now held by Banik and IDA 145.4 25.0 -

Total undisbursed 80.0 5.6 85.6

B. STATEMENT OF IFC INVESTMENTS(as of April 30, 1979)

Amount in $ MillionYear Obligor Loan Equity Total

1959 Industrias Textiles S.A. 0.14 0.141969 Hoteles de Centro America, S.A. 0.60 0.33 0.93

Total 0.74 0.33 1.07less sold, cancelled or repaid 0.47 0.10 0.57

Now held 0.27 0.23 0.50

- 28 -ANNEX IIPage 2 of 3

C. PROJECTS IN EXECUTION

Ln. 1007 Second Education Project, US$17.0 Million Loan of June 14,1974; Effective Date: October 11, 1974; Closing Date:December 31, 1980

The status of this project is discussed in paragraphs 44-45 of thisreport.

Ln. 1050 Sites and Services Project; US$6.0 Million Credit and US$2.5Cr. 517 Million Loan of November 4, 1974; Effective Date: February 3,

1975; Closing Dates: March 31, 1981 (Credit) and May 31,1981 (Loan)

Four years have elapsed since inception of the project, and civilworks are complete in five of the eight sites, about 15 months behind appraisalschedule. Units have been built at costs which have permitted their sale atprices within the reach of families with incomes of the target group. Totalunit development costs for each site, including price escalation allowances,have been within 6 percent of the anticipated cost. The implementing agency,Fundacion Salvadorena de Desarrollo y Vivienda Minima (FSDVM), has increasedits annual production capacity from 200 units in the early 1970s to about1,500 units at present. The completion of the community centers and markets(both the responsibility of the Government's community development agency) haslagged; however, an agreement has now been reached with the Government thatthe facilities would be completed with assistance from FSDVM. The two majorproblems encountered under the project (land acquisition and water supply inSan Salvador) have been resolved.

Ln. 1288 Seventh Power Project; US$30.0 Million Loan and US$9.0 Million1289T Third Window Loan of July 28, 1976; Effective Date: October 28,

1976; Closing Date: December 31, 1980

Procurement of major generating equipment has been carried out onschedule, while procurement of transmission system equipment is about fourmonths behind schedule. CEL's asset revaluation study has been completed.A study of the tariff structure is underway. The geothermal studies areproceeding on schedule.

Ln. 1465 Second Urban Development Project; US$6.0 Million Credit andCr. 726 US$6.7 Million Loan of July 28, 1977; Effective Date:

December 20, 1977; Closing Dates: August 31, 1981 (Credit)and August 31, 1981 (Loan)

Although less than two years have elapsed since inception of theproject, about 70 percent of the land required for the project has been pur-chased and the remainder selected; the purchase of the remaining land isexpected to be completed within the next one or two months. The design ofthe pilot upgrading component has been modified slightly, andl is about fourmonths behind schedule; land acquisition was completed in October 1978, andcommunity participation in the project is high. Legalization of the community

- 29 -ANNEX IIPage 3 of 3

association is scheduled for mid-1979. Commitments under the small businesscredit component grew from 470 loans in May 1978 to 2,640 loans in December1978.

Ln. 1570 Third Telecommunications Project; US$23.0 Million Loan of -

June 5, 1978; Effective Date: September 21, 1978; Closing Date:December 31, L[982.

Preparation of bid documents and technical specifications havebeen reviewed by the Bank and contracts for all goods are expected to besigned by July 31, 1979 (excespt for rural services which are expected to besigned by June 30, 1980). land acquisition for equipment installation isunderway.

Ln. 1571 Industrial and Agricultural Training Project; US$9.0 MillionLoan of June 93, 1978; Effective Date: October 27, 1978; ClosingDate: June 30, 1982

The status of this project is discussed in paragraph 46 of thisreport.

- 30 -ANNEX IIIPage 1 of 2

EL SALVADOR

FOURTH EDUCATION PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of Key Events

(a) Time taken to prepare project:

2 years (from September 1976 to September 1978)

(b) Agency which prepared project:

Ministry of Education

(c) First presentation to Bank:

January 1978

(d) Departure of appraisal mission:

September 26, 1978

(e) Completion of negotiations:

May 11, 1979

(f) Expected date of effectiveness:

October 26, 1979

Section II: Special Bank Implementation Actions

None

Section III: Special Conditions

1. The Government has agreed that:

(a) by June 30, 1981, all necessary action will betaken to organize and administer the primary schoolnuclearization and supervision system in a mannersatisfactory to the Bank (paras. 51 and 57);

- 31 -ANNEX IIIPage 2 of 2

(b) only qualified nuclei directors will be selectedwho are graduates of teacher training programsspecifically designed for this purpose, andthe directors will be provided with salaries at thelevel of "unified school director", and that projectschools will be staffed with qualified teachers whohave successfully completed in-service trainingcourses on rural community education, includingmultigrade teaching techniques (para. 51);

(c) by January 31, 1980, qualified professional staffwill be appointed for the textbook production pro-gram, and by December 31, 1982, an evaluation studyon student performance and achievement for selectedsubject areas will be undertaken (para. 55);

(d) all necessary measures, satisfactory to the Bank,will be taken to attract qualified professionalstaff for the project post-secondary technicalinstitute; by June 30, 1981, a student tracer andeducation evaluation system will be established foreach of the post-secondary technical institutes inthe country and the data collected would be used inadjusting courses to job market needs (para. 56);

(e) on an annual basis a physical and education auditof completed project facilities will be undertakento ensure that the physical facilities and educa-tional objectives are being implemented as envisaged,and such audit reports will be submitted to the Bankno later than January 31 of the following year (para.59);

(f) adequate budgetary allocations will be provided forthe maintenance and operation of project institutions(para. 59);

(g) as a condition of effectiveness, a project implementa-tion fund would have been established of not less thanUS$400,000, to be administered by the Project Coordi-nating Unit (para. 63); and

(h) as a condition for the disbursement for expendituresfor civil works and equipment for new and replacementrural schools, at least 65 sites would have beenacquired and an additional 35 sites selected forconstruction of project schools (para. 60).

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