PROJECT APPRAISAL DOCUMENT ONA …documents.worldbank.org/curated/en/516821468769865297/...CURRENCY...

Document ofThe World Bank

Report No: 19228-BR

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED LOAN

IN THE AMOUNT OF US$202.03 MILLION EQUIVALENT TO THE

FEDERATIVE REPUBLIC OF BRAZIL

FOR THE

SECOND SCHOOL IMPROVEMENT PROJECT - FUNDESCOLA II

JUNE 8, 1999

Human and Social Development GroupBrazil Country DepartmentLatin American and the Caribbean Region

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CURRENCY EQUIVALENTS(Exchange Rate Effective 312/1999)

Currency Unit = RealR$1.71 =US$ 1.00

FISCAL YEAR (FY) SCHOOL YEAR (SY)January 1-December 31 February-December

ABBREVIATIONS AND ACRONYMS

COEP State-based Project Executive Coordination (Coordena,do Estadual Executiva do Projeto)CONSED National Council of State Education Secretaries (Conselho Nacional de Secretdrios Estaduais de Educaqdo)CW Center-West region of Brazil, Comprising the states of Goias (GO), Mato Grosso (MT), and Mato Grosso do

Sul (MS), but excluding the Federal DistrictDGP Central Project Coordination Unit (Dire,do Geral do Projeto)FNDE National Education Development Fund (Fundo Nacional de Desenvolvimento da Educa,cdo)FUNDESCOLA School Improvement Program (Programa Fundo de Fortalecimento da Escola)FUNDEF Fund for the Development and Maintenance of Basic Education and Teacher Valorization (Fundo de

Desenvolvimento e Manutenrdo do Ensino Fundamental e ValorizaMao do Magisterio)GDE School Development Group (Grupo de Desenvolvimento Escolar)GT Technical Group (Grupo Tecnico)IBGE Brazilian Census Bureau (Instituto Brasileiro de Geografia'e Estatistica)ICB International Competitive BiddingICR Implementation Completion ReportINEP National Institute for Educational Research and Studies, a MEC-based agency (Instituto Nacional de Estudos e

Pesquisas Educacionais).LDB National Education Law (Lei de Diretrizes e Bases de Educacao Nacional)MEC Brazilian Ministry of EducationMOS Minimum Operational StandardsMOIP Project Operations and Implementation Manual (Manual de Opera,coes e Implementa,do do Projeto)N North region of Brazil, comprising the states of Acre (AC), Amazonas (AM), Amapa (AP), Para (PA),

Rond6nia (RO), Roraima (RR), and Tocantins (TO)NCB National Competitive BiddingNE Northeast region of Brazil, comprising the states of Alagoas (AL), Bahia (BA), Ceara (CE), Maranhao (MA),

Pemambuco (PB), Parafba (PE), Piaui (PI), Rio Grande do Norte (RN), and Sergipe (SE)NEBE Northeast Basic Education Project (I and II)OECD Organization for Economic Cooperation and DevelopmentPAE State Action Program (Programa de A ,do do Estado)PAM Municipal Action Program (Programa de A,co Municipal)PAZ Microregion Action Plan (Programa de AqJo Zonal)PDE School Development Plan (Projeto de Desenvolvimento Escolar)PGS Secretariat Business and Management Plan (Plano de Gestao da Secretaria)PME School Improvement Project (Projeto de Melhoria da Escola) initiated under PDEPNLD National Textbook Program (Programa Nacional do Livro Dideitico)PPO Research and Operationalization Program of Education Policies (Programa de Pesquisa e Operacionliza,do)PRASEM Municipal Education Secretariats Support Program (Program de Apoio aos Secretarias Municipais de

Educa,co)PTA Annual Work Plan (Plano de Trabalho Anual)SAEB National System for Basic Education Evaluation (Sistema Nacional de Avalia,do da Educa,do Bdsica)SEED Secretariat of Distance Education (Secretaria de Educa,co a Distdncia)SIED Integrated Education Information System (Sistema Integrado de Infoma,coes Educacionais)SPA Planning and Monitoring System (Sistema de Planejamento e Acompanamento)SEF Secretariat of Fundamental Education (Secretaria de Educa,do Fundamental)SEE State Education Secretariat (Secretaria Estadual de Educacao)SME Municipal Education Secretariat (Secretaria Municipal de Educa,do)UE School Council (Unidade Executora)UNDIME National Association of Municipal Education Managers (Unido Nacional dos Dirigentes Municipais de

Educa,do)

Vice President: S. Javed BurkiCountry Manager/Director: Gobind T. Nankani

Sector Manager/Director: Xavier CollTask Team Leader: Robin S. Horn

Federative Republic of BrazilSecond School Improvement Project-FUNDESCOLA II

Table of Contents

I. PROJECT DEVELOPMENT OBJECTIVES .................................................. 2

II. STRATEGIC CONTEXT .................................................. 3

A. SECTOR-RELATED COUNTRY ASSISTANCE STRATEGY (CAS) GOAL ......................................... 3........3B. MAIN SECTOR ISSUES ................................................. 3

1. Repetition .................................................. 42. Student achievement ................................................. 43. Teacher skills, qualifications and perceptions .................................................. 44. Poverty-relatedfactors .................................................. 55. Parent and community participation ................................................. 56. Lack offocus on the school .................................................. 67. Weak municipal-state system coordination .................................................. 6

C. GOVERNMENT STRATEGY .6D. KEY POLICY AND INSTITUTIONAL REFORMS SUPPORTED BY THE PROJECT .7

III. PROJECT DESCRIPTION SUMMARY .8

A. STRATEGY FOR STRENGTHENING SCHOOLS, SECRETARIATS AND PUBLIC PARTICIPATION . 81. School-Based Development - the First Level of Intervention .82. Institutional Support for School Development: the Second Level of Intervention .113. Social Mobilization and Public Accountability: the Third Level of Intervention .12

B. PROJECT COMPONENTS. 1 4C. PROJECT COST SUMMARY .17D. BENEFITS AND TARGET POPULATION .18E. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS:. 1 8

1. Central level coordination .182. State level coordination .193. Microregion level coordination .194. Municipal level coordination .19S. School level coordination .20

IV. PROJECT RATIONALE .20

A. PROJECT ALTERNATIVES CONSIDERED AND REASONS FOR REJECTION .201. Alternatives to working in Microregions .202. Alternative project designs .213. Alternative education levels .22

B. MAJOR RELATED PROJECTS FINANCED BY THE BANK OR OTHER DEVELOPMENT AGENCIES(COMPLETED, ONGOING, AND PLANNED) ............................................ 23

C. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN ............................................ 24D. INDICATIONS OF BORROWER COMMITMENT AND OWNERSHIP ............................................ 25E. VALUE ADDED OF BANK SUPPORT ............................................ 26

V. SUMMARY PROJECT ANALYSIS ............................................ 27

A. ECONOMIC ASSESSMENT ............................................ 27B. FINANCIAL ASSESSMENT ............................................ 28C. TECHNICAL ASSESSMENT ............................................ 28D. INSTITUTIONAL ASSESSMENT ............................................ 29E. SOCIAL ASSESSMENT ............................................ 30F. ENVIRONMENTAL ASSESSMENT ............................................ 32G. PARTICIPATORY APPROACH ............................................ 32

Identification/Preparation ............................................ . 32

V I. SUSTAINABILITY AND RISKS ............................... 33

A. SUSTAINABILITY ............................... 33B. CRITICAL RISKS ..................................... 34

VII. MAIN LOAN CONDITIONS ............................... 35

A. EFFECTIVENESS CONDITIONS ............................... 35

VIII. READINESS FOR IMPLEMENTATION ............................... 36

IX. COMPLIANCE WITH BANK POLICIES ............................... 36

X. ANNEXES

ANNEX 1 PROJECT LOGFRAME 37ANNEX 2 DETAILED PROJECT DESCRIPTION 41ANNEX 3 PROJECT COSTS 57ANNEX 4 ECONOMIC ANALYSIS 58ANNEX 5 FINANCIAL ANALYSIS 69ANNEX 6 PROCUREMENT, DISBURSEMENT AND FINANCIAL MANAGEMENT 73ARRANGEMENTS

ANNEX 7 POVERTY ANALYSIS 81ANNEX 8 SOCIAL AND BENEFICIARY ASSESSMENT 91ANNEX 9 TECHNICAL ANNEX 99ANNEX 10 INSTITUTIONAL ANNEX 105ANNEX 11 PROJECT PROCESSING BUDGET AND SCHEDULE 111ANNEX 12 DOCUMENTS IN THE PROJECT FILES 112-ANNEX 13 STATUS OF BANK GROUP OPERATIONS IN BRAZIL 113ANNEX 14 BRAZIL AT A GLANCE 115

Document ofThe World Bank

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Latin American and the Caribbean Regional OfficeCountry Department 5

Project Appraisal DocumentFederative Republic of Brazil

Second School Improvement Project -- FUNDESCOLA II

Date: June 8, 1999 Task Team Leader: Robin S. HornCountry Director: Gobind T. Nankani Sector Director: Xavier CollProject ID: 50763 | Sector: Education Program Objective Category: Poverty ReductionLending Instrument: Specific Investment Loan Program of Targeted Intervention: [X] Yes []NoProject Financing Data [X] Loan []Credit [ Guarantee []Other [Specify]

For Loans:

Amount: US$202.03 millionProposed terms: [X] Multicurrency [ ] Single currency, US DollarGrace period (years): 5 [X] Standard Variable [ ] Fixed [] LIBOR-basedYears to maturity: 15Commitment fee: 0.75%Front end fee: 1.0%

Financing plan (US$m):Source Local Foreign TotalGovernment of Brazil 200.00 0.0 200.00IBRD 140.00 62.03 202.03Total 340.00 62.03 402.03

Borrower: Federative Republic of BrazilGuarantor: n.a.Implementing Agency: Ministry of Education (MEC)

Estimated disbursements--Bank FY/US$M 2000 2001 2002 2003 2004Annual 32.03 50.00 60.00 50.00 10.00Cumulative 32.03 82.03 142.03 192.03 202.03

Project Implementation Period July 1999 - June 2004

Expected effectiveness date: August 15, 1999 Closing date: December 31, 2004

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FUNDESCOLA II Project Appraisal Document

I. Project Development Objectives

FUNDESCOLA II is the second in a series of projects designed to improve theperforrnance of public primary' education in selected areas of the North (N), Northeast (NE)and Center-West (CW) regions. The overall FUNDESCOLA Program2 has been agreed to inprinciple by the World Bank (Bank) and the Government of Brazil (Borrower),3 and will befinanced through a series of loans. Like its sister projects, FUNDESCOLA II will contribute toachieving the overall sector goal of ensuring that children from the poorest regions of Brazilsuccessfully complete a basic eight-grade education. This will help guarantee that thesechildren are better prepared to participate as active and productive citizens in a democraticsociety, and will aid in reducing the stark inter-regional disparities in educationalachievement.

A. Project mission, development objective, andperformance indicators

The Project mission is to improve the performance of the public education systems inthe poorest regions of Brazil by strengthening primary schools4 and the public institutionsresponsible for them in a coordinated management framework. FUNDESCOLA II'sdevelopment objective is to improve the educational outcomes of children enrolled in publicprimary schools in the Project's targeted areas, as measured by promotion and achievementrates.

Key performance indicators for this development objective (to be achieved by June2007) are to:

* increase the proportion of fourth grade students meeting acceptable learning standardsfrom 28.3% (N), 32.8% (NE) and 36.7% (CW) in 1997 to 50% in 2007 in the Project'stargeted areas';

e increase the proportion of eighth grade students meeting acceptable learning standardsfrom 43.6% (N), 43.8% (NE) and 54.9% (CW) in 1997 to 60% in 2007 in the Project'stargeted areas.

Leading performance indicator. The key performance indicators will be tracked andanalyzed on an ongoing basis. Because FUNDESCOLA II will be completed before its results asjudged by these indicators can be fully assessed, project monitoring will rely on a leadingindicator (to be achieved by June 2004):

* increase the average promotion rates in primary school from 64.2% (N), 64.7% (NE)and 71.5% (CW) in 1997 to 85% in 2003 in the Project's targeted areas.

1"Primary education" throughout this document is defined as grades one through eight of basiceducation, for children aged 7-14 years, and referred to as educacao fundamental regular in Brazil.

2 From this point forward, reference to "FUNDESCOLA" refers to the program as a whole, wh.lereference to the "Project" or "FUNDESCOLA II " refers to the project appraised in this document.FUNDESCOLA I was approved by the Board on April 2, 1998.

3 See Project Concept Document dated October 16, 1997 (for FUNDESCOLA I), and December 4,1998 (for FUNDESCOLA 11).

4 A "primary school" provides "primary education" in grades 1 - 8, or any combination thereof5 The "acceptable learning standards" are defined by the National System for Basic Education

Evaluation. (SAEB). These percentages are for Portuguese only as comparable indicators for mathematicsare unavailable.

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In addition to these overall measures of system performance, the effectiveness ofindividual activities and reforms supported under FUNDESCOLA I and II will be monitored andevaluated under the research component.

FUNDESCOLA I and II share the same overall approach and structure, and will finance manyof the same activities.6 The primary difference between the two projects is one of time andgeography. Whereas FUNDESCOLA I funded the start-up of program activities in ten capital-citymicroregions in the North and Center-West, FuNDESCOLA II will initiate activities in the ninecapital microregions of the Northeast and eight additional microregions in the North and Center-West. It will also continue financing activities begun in the first group of microregions underFUNDESCOLA I.7 Although all of the 16.5 million public primary school children in the threeregions served by the project will benefit from several of the components, project activities willbe primarily directed toward 4.7 million children, enrolled in 13,500 schools in 247municipalities located in 27 microregions. (For further discussion of the microregion concept,see IIIA and fVA below as well as Annex 7; for a summary of differences between FUNDESCOLAI and II see Annex 2.)

II. Strategic Context

A. Sector-related Country Assistance Strategy (CAS) goalCAS document number: 16852-BR. Date of latest CAS discussion: June 2, 1998

The education sector goal of the CAS is to provide the opportunity for all children tocomplete the eight-year fundamental schooling cycle by 2007, and to improve educationalattainment and academic performance in basic subjects, particularly Portuguese and mathematics.FUNDESCOLA will directly contribute to attain these goals by improving primary school qualityand educational outcomes, and by monitoring progress toward obtaining these goals throughproject performance indicators. By targeting the three poorest regions of Brazil, and by reducingregional disparities in student achievement, FUNDESCOLA will also contribute to achieving theoverall objective of poverty reduction as stated in the CAS. Given the extensive coverage of thisproject (target population comprises approximately 29 percent of total sector beneficiaries) aswell as the ongoing fiscal crisis in Brazil, it is likely that without the successful implementationof FUNDESCOLA, the education sector goal of the CAS would not be within reach. FUNDESCOLA,now more than ever, represents the cornerstone of federal efforts in education.

B. Main sector issues

Since 1995, improved education system performance has been the central social policyobjective in Brazil. The government has introduced major reforms aimed at helping to ensure thatby 2007 every Brazilian child will complete his or her primary education at an acceptable level ofacademic achievement.

These system performance gains can best be seen over the last decade in which Brazildemonstrated impressive improvements in system efficiency (as indicated by promotion rates)and coverage (as measured by enrollment rates). The primary school promotion rate has increasedby 10 percentage points (from 57 to 67 percent) over the past ten years. The improvement in

6 For a description of the differences between FUNDESCOLA I and FUNDESCOLA 1i, see Table 1("Project Components"), and Annex 2 ("Detailed Project Description").

7For a listing of microregions covered by the project, please see Annex 7.

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FUNDESCOLA 11 Project Appraisal Document

coverage is even more striking: while the net primary school enrollment rate increased by 15percent nationally, a significant gain in itself, the poorer Northeast states experienced a gain of 30percent. Consequently, today only eight percent of children aged 7 - 14 years are out of school inthe Northeast and North regions, and 6 percent of 7 - 14 year olds are out of school in the Center-West states.

Despite this substantial progress and the political and societal commitment shown toeducation during the past ten years, previous decades of inequality in funding and low prioritygiven to education mean that these gains have been made from a relatively low base. Currentindicators reflect the need for continuing attention to the sector. The sector issues outlined belowpose a particular challenge for reform in the North, Northeast and Center-West regions.

1. Repetition

Brazil has some of the highest repetition rates in Latin America, presenting a formidablechallenge to education reformers. Even though primary school completion rates doublednationally between 1985 and 1997, and significant improvements in aggregate repetition rateswere achieved, the failure rates in the North (over 42 percent), Northeast (approximately 45percent) and Center-West (over 35 percent) regions remain extremely high - especially incomparison with the South (approximately 25 percent). The main consequences of these poorindicators are twofold: first, enormous resources are spent in producing one eighth gradegraduate, some 18 years on average; and second, faced with the prospect of having to repeat thesame grade level over and over, many children choose to drop out.

2. Student achievement

According to the Brazil's National System for Basic Education Evaluation (SAEB),student achievement in the North, Northeast and Center-West states falls below the nationalaverage and substantially below that of wealthier states in the South and Southeast. MEC's state-of-the-art SAEB assessment system classifies learning achievement with respect to a uniformscale of proficiency. The 1997 SAEB assessment results find that less than 25 percent of fourth-grade pupils in the Project's three regions surpass the lowest performance level on the scale. Thismeans that in mathematics, three out of four children are unable to demonstrate understanding ofplace value, multiply and divide numbers, add fractions with the same denominator, or solveproblems that require more than one step. In terms of literacy, this means they are unable torecognize that authors use language to express different emotions, or that context can be used toanalyze meanings of words in a text passage. In the sciences, these children have nocomprehension of basic natural science concepts such as gravity and the transport of oxygen bythe blood; they are also unfamiliar with the use of scientific language to describe phenomena.

3. Teacher skills, qualifications and perceptions

In the North, Northeast and Center-West regions, out of a total of 572 thousand primaryschool teachers, approximately 41,000 have not completed primary school and about 96,000 havean incomplete secondary school education or are not certified. Municipal and state schoolscompete for uncertified teachers who are underpaid and who often work two or three shifts. Thelack of an attractive career plan, with salaries adequate to attract and maintain qualified andeducated teachers, affects the entire system. Low content knowledge and poor teaching skills areimportant contributing factors to high repetition and dropout rates and low student achievement.

Equally important is the lack of focus on student leaming achievement. Few teachersinterviewed as part of a beneficiary assessment study evaluated their own performance in terms of

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student leaming and most attributed student failure to the students themselves. A 1990 studyfound that a majority of school principals placed student learning in fourth place in order ofimportance, behind: (1) the relationship between school teachers and other employees; (2)administrative performance; and (3) teacher performance. The items considered least importantwere: (1) dropping out; (2) repeating; and (3) passing to the next grade. The same study alsofound that student achievement was higher in those schools where it was ranked higher in priorityby school principals.8

4. Poverty-related factors

In 1996, at least 23 percent of all Brazilians were poor, where the poor are defined asindividuals living in households with per capita monthly incomes below R$65.07.9 TheNortheast, North and, to a lesser extent Center-West are the poorest of Brazil's five geographicregions, with poverty headcount ratios of 30, 48 and 16 percent, respectively. Using a higherpoverty line of R$131.97 (which allows for the non-food expenditures made by people whoseincomes just allow them to purchase the minimum food basket) results in a poverty headcountindex of 45 percent for Brazil as a whole, and regional poverty rates calculated at 60, 75 and 45percent, respectively, for the North, Northeast and Center-West.

Poverty affects children's chances of successfully completing an eight-grade education.Studies have shown that parents' demand for schooling for their children depends in part on theirown level of education. Since low education level of the household head is strongly correlatedwith poverty, and most poor households are headed by someone with less than four years ofschooling,'0 it follows that poor children are at a disadvantage: they are less likely to live in afamily that values education highly. Moreover, parents' lack of experience with the school systemhinders their ability to participate in their children's education and to advocate on behalf of theirchildren with teachers and other school authorities. Finally, poor children generally have accessto poorer quality schools than others, whether quality is measured by the adequacy of the facilityitself, availability of textbooks and other learning materials, or teacher qualifications. Poor schoolquality is linked with both repetition rates and non-attendance, particularly low attendance amongolder children. One of the consequences of low quality schooling is that about one in four poor 7to 14 year olds (and 40 percent of poor 15 to 17 year olds) who are out of school report that "lackof interest" is their main reason for not attending school.

5. Parent and community participation

There is a strong relationship between student performance and the establishment of aschool council or similar school-linked associations with parental participation."1 Schoolperformance is higher in schools that routinely inform parents about their children's progress.Active school councils or associations have not traditionally been part of the education tradition,particularly in the North, Northeast and Center-West, where school authorities do not routinelyseek community involvement and views.

' 1990 SAEB study.9 The poverty rates provided here were calculated by Ferreira, Lanjouw and Neri from the 1996

PNAD, for the Brazil Urban Poverty Strategy Paper (in process). R$65.07 is an "indigence line" equal tothe cost of a "minimum food basket."

10 ibid."A Call to Action."

5


6. Lack of focus on the school

Most medium or large-sized municipal and state secretariats have archaic or bureaucraticstructures that do not treat the school as their primary client.12 Consequently, they have greatdifficulty in supporting school autonomy, establishing school accountability systems, orpromoting and supervising school improvement programs. This lack of focus on the school hasthree main causes: a very large number of schools and students that have stretched thesupervisory resources of these secretariat offices beyond their limits; poor education planning andscarce information on local needs; and historical patterns, including patronage relationshipswhich run parallel to (and often at odds with) actual educational needs.

7. Weak municipal-state system coordination

The presence of a state education system and hundreds of municipal education systemswithin the states, functioning in parallel but without coordination, makes the administration ofpublic schooling complex.13 The result is an aggregation of educational activities, patchedtogether by a jumble of agreements and conflicting interests, without sufficient regulationregarding the interaction of the participating agents, and without either level of governmenttaking full responsibility for assuring quality education for all. The overlapping of administrativesystems makes it difficult to optimize resources, engenders inequality of opportunity and pavesthe way for political patronage.

C. Government strategy

FUNDESCOLA implementation occurs at a propitious moment for improving primaryeducation in Brazil. The federal government has given highest priority to primary education,initiating a number of significant reforms including: (a) amendment of the constitution andapproval of a law redefining the roles and responsibilities of each government level to ensure aminimum per student expenditure; (b) direct transfer of funds to the schools, in an effort toincrease school autonomy and effectiveness; and (c) improvement of education quality, through anational assessment system (SAEB), a textbook quality and distribution improvement program,and national standards for curriculum development. These reforms, designed to decentralize thefunding of primary education, diminish regional disparities, and increase coordination among thevarious systems, should have a profound impact on school quality, particularly to the degree thatstates, municipalities and schools effectively use these resources, and to the degree that the publichas efficient mechanisms to monitor the application of these finances.

The Government's strategies and goals for the education sector are further outlined in theMinistry of Education's adoption of the National Education Council's "1998 National Plan forEducation."14 The National Education Council's initiatives for the primary education sectorspecify a number of goals that FUNDESCOLA II will support, including: increasing the number ofgraduates by 70 percent, which will require an annual 5 percent reduction in repetition anddropout rates, increased student performance as measured by the national assessment system(SAEB); elimination of the category of uncertified teacher; definition of minimum operationalstandards; a guarantee that new schools meet these minimum operational standards; an increase

12 ibid.13 Ibid14 The National Education Council is an association of education leaders from municipal, state,

and national governments, universities, labor groups, and other non-government organizations. The Councilhas statutory responsibilities for the formulation of education policy under mandates in the constitution andspecific legislation.

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in the community's participation in education; and the promotion of school autonomy. In short,those issues which are at the heart of the design of FUNDESCOLA have been taken up as thestandard of the federal government, in its efforts as champion of educational improvement.

D. Key policy and institutional reforms supported by the project

FUNDEF. With the objective of reducing the disparities in the financing of primaryeducation across states and municipalities, Congress approved Constitutional Amendment No.14/96 on December 9, 1996. This amendment, along with Federal Law No. 9.424/96 ofDecember 24, 1996, established the Fund for the Development and Maintenance of BasicEducation and Teacher Valorization (FUNDEF), requiring that fifteen percent of total municipaland state revenues be used to finance an education fund in each state. This fund guarantees thatevery primary school student, whether enrolled in a state or municipal school, benefits from aspending floor of R$300 (raised to R$315 for calendar year 1998). Amendment No. 14/96 alsorequires that the federal government top up with federal funds any state's FUNDEF that fallsbelow the spending floor.

FUNDESCOLA II supports FUNDEF in two major ways. First, FUNDESCOLA will promotelocal accountability by: (i) training municipal secretaries of education and members of thelegally-mandated municipal FUNDEF council in the project's targeted areas; and (ii) bycollecting and analyzing local financial data and by publishing information on FUNDEF revenuesand expenditures in each municipality and state participating in the FUNDEScOLA II project.Second, FUNDESCOLA will develop tools and programs for municipal and state governments touse to meet several of FUNDEF's mandates including: (i) guidelines and software for municipalgovemments to create cost-efficient and quality-promoting career systems for their teachingforce; (ii) instruments and software for systematic monitoring of educational finance; and (iii) thedevelopment and financing of the PROFORMACAO distance education program for training andcertifying teachers (described below).

School Autonomy. The National Education Development Fund (FNDE)-sponsored "MoneyDirect to the School Program," which was designed to increase school autonomy and reduceinequalities, has expanded rapidly since its inception in 1995, transferring resources on the basisof school size and community participation."5 FUNDESCOLA's design, promoting thedevelopment of school-based planning skills, should help ensure that these new resources areused to the greatest advantage.

The 1996 National Education Law (LDB) stimulates innovation and initiative on the part ofeducational agents in order to avoid excessive bureaucratization, give priority to primaryeducation and strengthen the role of the municipality in the provision of grades one through eight.The LDB also guarantees that every public school in Brazil must meet acceptable minimumoperational standards. Still needed, however, is an operational definition of minimum operationalstandards and its incorporation into the daily life and culture of school and system management.FUNDESCOLA'S activities in this area are a direct attempt to meet this need.

" On January 13 1999, Congress approved a provisional law (Medida Provisoria 1784-1) toinstitutionalize this federal transfer of resources to schools.

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III. Project Description Summary

A. Strategy for strengthening schools, secretariats and public participation

The FUNDESCOLA program starts from the premise that children's educationalperformance is largely determined by the quality of the schools they attend. At the school level itis a function of three sets of interrelated factors: (a) the knowledge, practices and commitment ofthe school's principal and staff; (b) the school's learning conditions; and (c) parent support forschooling and their own children's learning. A second and related proposition is that these factorsare dynamic and can be affected by government policy and programs. Finally, publicunderstanding of and support for school-based development is an essential ingredient in assuringthe political climate and resource base to sustain and expand the education development process.Consequently, in order to improve children's learning performance in the public elementaryeducation system within the North, Northeast and Center-West regions of Brazil, theFUNDESCOLA program will work at three levels of intervention: the school, the educationsecretariat and the broader public.

FUNDESCOLA STRATEGY

2 : a~~~~~~~~~ ~ ~~~~~~. .... ... ... .... .. iSO;A MOAb;11BILZATION, COMMUNIC:ATIO3N AND PUBIC ACCONTABILIY(Level 3)

IN900STITUTIONA SUPPORT lO ChO flEV)LOPMEN (Leel 2)i 000903}ji

1. School-Based Development - the First Level of Intervention

School improvement is grounded in the notion of a school-based development strategy.The ultimate objective of this strategy is to transform thousands of poorly performing schools,

which enroll the majority of children in the project's targeted regions, into effective, high quality

institutions in which student learning is prioritized and the elusive goal of success for all students

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is increasingly within reach. This strategy is based upon the proposition that school reform canand does take place when the school principal and staff are given greater responsibility for schoolimprovement, offered well-structured guidance in the process of self-diagnosis and strategicplanning, and are supported by a regular technical assistance and follow-up program. In addition,the institutional and local political environment must be rest--uctured to support these types ofchanges.

FUNDESCOLA's school-based development strategy is designed to be phased in over timefor two reasons. First, this type of transformation requires fundamental changes in theknowledge, attitudes, and behaviors of school principals, teachers and parents, as well the staffand management of the secretariat of education. It takes time for these stakeholders to recognizetheir responsibility and ability to make school reform happen. Second, experience and researchdemonstrate that it is not possible to motivate and support school reform simultaneously in a largenumber of schools. Consequently, whereas all schools in the region will immediately benefit fromthe direct transfer of resources, fewer schools will undertake a development plan or continue withthe strategic planning process (please see also Section IVA, Project Rationale, and Annex 2 formore detailed information on inputs and school selection criteria).

Step 1: Schools given resources to manage

The first step in the school-based development strategy is that schools must be givensome autonomy over financial resources. This autonomy helps the school staff and communitymake decisions that materially affect the school and helps them assume greater responsibility forresults. Under the FUNDESCOLA program, therefore, all municipal and state schools in theNortheast, North and Center-West Regions will receive a small discretionary budget (enough, forexample, to purchase two books per student) through direct transfer from the federal government.The project will deposit these funds into a school bank account managed by the school executingunit or council, composed of parents and school staff. This council will be responsible for makingdecisions about how to spend the funds, carrying out comparison shopping, ordering andreceiving the goods and services, and keeping the accounting records up-to-date.

Step 2: Helaing schools attain Minimum ODerational Standards.

In order to improve educational outcomes, schools must be capable of functioning at leastat a minimally acceptable level. Within the three target regions, decades of inadequate educationfinancing have yielded thousands of schools in which teaching-learning conditions are so poorthat they cannot be properly termed "schools." In addition, because state and municipalgovernments have consistently allocated system resources without planning or targeting theworse-off schools, nearly every municipality in the targeted area suffers from tremendousdifferences in learning conditions across schools and neighborhoods.

The second step in the school development strategy is to improve conditions in theseschools so that all children have the opportunity to learn. The minimum operational standardsmodel is a checklist that specifies the essential inputs and human resources needed for schools tofunction and offer children the opportunity to learn. Each and every school in the targetedmicroregions is visited and examined by local education secretariat staff trained in the applicationof the minimum operational standards instruments. Schools found to be incomplete in any one ofthe essential elements, from qualified teachers to basic educational materials, are consideredbelow standard. The investments needed to bring each school up to standard are carefullyspecified and costed out. This information is then used in the development of municipal and statestrategies to bring all schools up to standard within an agreed timeframe. In addition to helpingthese secretariats of education identify substandard schools and develop an investment strategy,

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FUNDESCOLA will finance the classroom module of minimum operational standards for 25percent of schools (serving approximately 1,120,000 students) in the targeted areas. FuNDESCOLAwill also finance PROFORMAQAO, a distance-education teacher qualification program to train andcertify teachers in the 19 states served by the project (see section V(C)).

Step 3: Schools prepare own "School Develovment Plan "

The FUNDESCOLA strategy recognizes that once schools are on the road to attainingminimum operational standards, the school team can more effectively focus on its primarymission -- improving student learning. Importantly, the strategy accounts for the fact that havingthese minimum conditions alone will not lead to improved educational outcomes. Within a subsetof schools receiving the classroom module for minimum operational standards, therefore,FUNDESCOLA will support an intensive school-based institutional development and strategicplanning process culminating in a school development plan.

The school development plan is both the result of one process (diagnosis and strategyformulation) and the starting point of another (school improvement implementation andmonitoring). School principals initially undergo an intense training program in strategic planning,addressing such issues as community mobilization, resource management, and teacher careerplanning. These skills are immediately applied in the design of their own school developmentplans. The entire school community (including parents, teachers, and school staff) meets toidentify, analyze and prioritize the problems at the school, establish and quantify specific schoolimprovement objectives, and agree on an action plan. The expression of this overall diagnosis andagreement on actions and targets is the school development plan. Equally important is theprocess of cooperation, in which students, parents, teachers and school directors work together atevery stage of the plan's development to reach concrete goals for their school. Initial experienceshave shown that this participatory process not only results in increased loyalty and support to theschool on the part of parents and staff, but serves as a rich and highly practical professionaldevelopment program for the school principal.

Step 4: Schools receive financing to execute their School ImDrovement Project

The school development plan includes a section called the school improvement project(PME). This is a specification of an action plan the school stakeholders have identified asnecessary for the school to achieve its agreed targets. It also estimates the financial support theschool needs to carry out their school improvement project. Schools use their schoolimprovement projects to inform municipal and state education authorities on which inputs ortraining they need help in financing. Schools then purchase services and activities that theydetermine are important for achieving their school development plan goals, i.e. upgrading libraryor lab equipment, or improving teacher practice in math. FUNDESCOLA will finance these schoolimprovement projects and will promote their financial sustainability. In addition, after the firstround of school improvement projects is completed, FUNDESCOLA II will finance, through acompetition, additional rounds of school improvement projects from the same schools thatelaborated school development plans during the first year. Finally, to promote the expansion ofthe process to other schools in the microregion, FUNDESCOLA II will also offer a matching fund:municipalities or states will be able to match their own resources to those of this fund to financeschool improvement projects developed by schools not included in the project's initial selection.

Step 5: Schools adapt and implant teachi,w/learning models and desions.

The final step in the strategy is based on the proposition that even when schools havesome autonomy over their budgets, have attained minimum operational standards, have gone

10


through the process of creating a school development plan, and are implementing schoolimprovement projects in a sustainable way, efforts to improve educational outcomes may behampered by a lack of knowledge of effective pedagogical and managerial strategies.Accordingly, FUNDESCOLA will support the further development and pilot testing of a range ofpedagogical and managerial models that have been used successfully in Brazil and othercountries. One of these designs, Escola Ativa, was developed and pilot-tested by the Second andThird Northeast Basic Education Projects as an innovative whole-school design for rural multi-grade (1st through 4h grade) schools. It is currently being implemented by 178 schools underFUNDESCOLA I financing and will be expanded, under FUNDESCOLA II, to over 1,200 schools.FUNDESCOLA II will develop, test, and disseminate other models that schools or school systemsmay adopt in order to improve classroom instruction, content knowledge, and content-relatedpedagogy. This may include: (a) intensive professional development models centered around therecently approved National Curriculum Parameters; and (b) models designed around theclassroom application of learning assessment tools coupled with a targeted teacher developmentand support program.

2. Institutional Support for School Development: the Second Level of Intervention

While the major emphasis of the FUNDESCOLA design is to improve conditions at theschool in order to raise student attainment and achievement, the approach also recognizes thatschools do not exist within an institutional vacuum, but in fact depend on other entities forguidance and resources. These are the state or municipal secretariats of education responsible formanaging the schools under their administration. In order for the school-based developmentstrategy to be effective and self-sustaining, local education managers and their institutions need tounderstand and accept the rationale behind the strategy and command the know-how to supportand promote school-based development. Consequently, the project design includes a program ofsecretariat-based institutional strengthening. This program centers around two elements: (a) amanagement instrument-the Secretariat Management and Business Plan; and (b) software anddatabases for resource planning-the Microplanning Geographic Information System and theIntegrated Management Information System.

(a) Helping Secretariats Develop Management and Business Plans

FUNDESCOLA II will help secretariats of education, both at the municipal and state level,integrate the key elements of the FUNDESCOLA program into their administrative structurethrough the use of a new instrument, the Management and Business Plan (PGS). In partnershipwith FUNDESCOLA, Secretariats of Education will develop a management plan to re-orient theirprograms and organizational structure to focus on schools-promoting equity, effectiveness, andefficiency within their systems. For example they will develop their own investment strategy touse the minimum operational standards both to target the least endowed schools and tosystematically coordinate the delivery of complete packages of inputs and teacher certificationsupport to assure that all children have an equal opportunity to learn. The Plan will also help thesecretariat enhance their supervisory function, making it both technically competent and orientedto support schools' efforts to prepare and implement school development plans and schoolimprovement projects. In addition, secretariats will be able to access information on revenues andexpenditures, both from FUNDEF and other sources in order to budget effectively. They willacquire the legal instruments needed to transfer their own resources to schools. Finally, they willuse the Management and Business Plan to design and institutionalize a career plan for educationprofessionals emphasizing continuous improvement and incentives for better classroomperformance of teachers. Finally, FUNDESCOLA I will promote transparency, joint planning, andintegrated commitment for municipal and state governments to coordinate their delivery of

11


education in every municipality and to assure that all children have access to school. (see alsoAnnex 10)

(b) Usinz New Software and Databases for Planning and Monitorin'

Under the Northeast Basic Education Projects and FUNDESCOLA I, two new informationsystems have been developed for use by Education Secretariats: the Education MicroplanningGeographic Information System and the Integrated Management Information System. These arehighly sophisticated computer applications, developed for and fully tested in the Brazilianeducation context, designed to help secretariats of education undertake school system planning,resource allocation, personnel management and promote accountability. Under FUNDESCOLA II,these software applications will be incorporated into the Secretariat Management and BusinessPlan so that installation, training and utilization of the instruments can be integrated into a singleinstitutional development program.

3. Social Mobilization and Public Accountability: the Third Level of Intervention

Turning education development upside-down in Brazil by putting the school rather thanthe government in the driver's seat will require a substantial shift in perceptions, attitudes, andbehavior on the part of politicians, administrators, teachers, principals and parents. Influencingthese attitudes, encouraging participation, and disseminating the results of these changes arecrucial to FUNDESCOLA project implementation success as well as the institutional sustainabilityand expansion of these new approaches across the region.

(a) Communication and Social Mobilization

To generate widespread support for the school-based development process, therefore,FUNDESCOLA II will undertake a major social marketing campaign to: (a) generate understandingand support among parents, teachers, students, politicians and the community at large of theimportance of schooling for personal and social growth and economic development; (b) stimulatesupport for the school-based development strategy among these stakeholders and beneficiaries;and (c) encourage specific behaviors, such as participation by parents and community members inschool councils and holding schools accountable for educating and promoting all children.

(b) Accountability

In addition, a final element of the FUNDESCOLA strategy is ensuring that stakeholdershave sufficient information to be able to set educational goals and be held accountable for theirpart in achieving them. This will be done largely through support to existing national-level effortsto improve the reliability and availability of educational information. National assessment resultswill be categorized by school characteristics and disseminated to schools and school systems;performance indicators from each school will be reported to each school and system in the sameyear; standardized criterion-referenced test packages will be developed and made available toschool systems, and the results of FUNDESCOLA implementation and impact studies will bedisseminated. Under FUNDESCOLA II, much attention will be focused on: (a) the effectivedissemination of relevant information to different education system actors for use in educationalplanning; and (b) the process of institutionalization of the National Institute for EducationalResearch. This institute is in charge of the management of the National Education InformationSystem and the National System for Basic Education Evaluation (SAEB). As these systems are

12


relatively new, it is imperative to mainstream procedures and support strategic development inorder to guarantee sustainability.

(c) Research. piloting, analysis, and dissemination

In collaboration with World Bank technical staff and other national and internationalexperts, FUNDESCOLA n1 will undertake a longitudinal study of project implementation andimpact, with a special focus on the school-based development strategy. The design of this studywill incorporate random assignment, multiple data sources and methodologies, and state of the artanalytic approaches. Results of this study will be widely disseminated in Brazil to stimulate theexpansion of project activities and increase the potential impact of the project.

13


B. Project components'6Components and Description Level/Focus of Relation toSub-components Activity FUNDESCOLA II. Raising Schools to Ensuring schools have Statewide andMinimum conditions minimally microregionsOperational adequate for learningStandardsA. Promoting School Direct provision of All schools statewide FUNDESCOLA II willAutonomy funds to schools for will receive financing finance NE region,

minor school repair, and continueas well as purchase of, financing of N andinter alia, supplies, CW begun underinstructional material FUNDESCOLA I& equipment

B. Educating and Training for All schools with FUNDESCOLA I isCertifying Teachers approximately 69,000 uncertified teachers, funding program

uncertified teachers in statewide. development;grades 1-4 through FUNDESCOLA II willsupport for national fund implementationdistance learning in all three regionsprograms

C. Supplying Basic Purchase of school Within selected FUNDESCOLA II willFurniture and furniture and microregions, only fund capitalEquipment equipment necessary those schools with microregions in NE

to bring schools up to physical conditions states and 8 newminimum operating adequate to receive microregions in N andstandards these inputs CW

D. Financing School- Major renovation for Within selected FUNDESCOLA II willManaged Physical schools in too poor of microregions, those fund capitalRehabilitation shape to receive schools with more microregions in NEProjects furniture and than 100 students in states and 8 new

materials need of major microregions in N andrehabilitation to be CWbrought up tominimum standards

E. Implementing the Construction of new Within selected FUNDESCOLA I doesModel School model primary microregions, those not coverProgram schools. Priority schools proposed by construction;

given to replacing the Forum and FUNDESCOLA II willschool that are unsafe, approved by DGP as cover construction inunsalvageable, or per microplanning N, NE and CWincapable of meeting technicaldemand as identified specifications andby microplanning priorities.priorities

16 See Annex 2 for a detailed description.

14


Components and Description Level/Focus of Relation toSub-components Activity FUNDESCOLA III. Establishing a School-based Those schools withinSchool Development initiative to improve microregions thatProcess school quality and approach minimum

student learning operating standards

A. Designing and Consensus-building All schools that FUNDESCOLA II will

Implementing School process on part of approach minimum finance capitalDevelopment Plans school and operating standards microregions in NE;(PDE) community focussing with more than 200 18 additional

on school students in selected microregions in N andimprovement microregions CW

B. Financing School School Development Phase 1: All schools FUNDESCOLA II willImprovement Projects Plans will include with completed school cover Phase I in N,(PME) specific proposal for development plans; NE and CW; as well

financing school Phase 2: For as Phase 2 in N andimprovement participating schools' CW

2nd year, 2/3 of Planswill be financed on acompetitive basis.Phase 3: Incentivesfor jurisdictions toexpand to additionalnumbers of schools

C. Developing, Pilot different A subset of schools New to FUNDESCOLATesting and approaches and having completed a II

Implementing materials aimed at School DevelopmentPedagogic Models improving pedagogy Plan

and student learningIII. Promoting Efforts to stimulate National/state/Communication and demand and support MicroregionsSocial Mobilization for the school-based

development approachand disseminateresults

A. Supporting Dissemination of National/State/ New to theFUNDESCOLA through strategy and results of Microregions FUNDESCOLA IICommunication and FUNDESCOLA projectDissemination programB. Carrying out Social Building a network of States/ Some activitiesMobilization social communicators Microregions included underCampaigns to mobilize the public FUNDESCOLA I; higher

around FUNDESCOLA priority inobjectives FUNDESCOLA II

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Components and Description Level/Focus of Relation toSub-components Activity FuNDESCOLA I

IV. Strengthening Support for existing Primarily national, but Continued financingNational Education efforts to improve with state and school under FUNDESCOLA II

Information Systems reliability of and linkages with additionaland Programs access to information activitiesA. Improving Efforts to improve Primarily national, but Continued financingEducational national assessment with state and school under FUNDESCOLA II

Assessment and integrate national linkages with additionaland international best activitiespractice

B. Improving and Support for Integrated Primarily national, but Continued financingDisseminating Education Information with state and school under FUNDESCOLA II

Educational System (SIED), linkages with additionalInformation school census and activities

other activitiesC. Developing Studies Evaluation studies for Primarily national, but Continued financingand Research in FUNDESCOLA, as well with state, school and under FUNDESCOLA II

Education as other issues project linkages with additionalactivities

V. Management and Support for various State/Microregions Continued financingInstitutional institutions involved under FUNDESCOLA II

Development of in supporting schools with additionalEducation Systems and program activities

im lementationA. Strengthening Training, workshops, State/Microregions Increased emphasisState and Municipal and programs to under FUNDESCOLA II

Collaboration promote transparency, with additionalcommitment, and activitiesintegration ofplanning for state &municipal government

B. Institutional Developing new States/Municipalities FUNDESCOLA II will

Development for management models introduce this newSecretariats of for state & municipal subcomponentEducation Secretariats of

Education to promoteequity, efficiency, andeffectiveness

C. Implementing Development of Microregions/ FUNDESCOLA II will

Microplanning surveys & geographic Municipalities finance NE capitalinformation database microregions and 8to increase ability of new microregions inEducation Secretariats N, CWto promote access,equity and quality

C. Project National/State Continued financingManagement & Pilot under FUNDESCOLA 11

Activities

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C. Project Cost SummaryComponent Category Costs- % of Bank- % of Bank

includes Total financing FinancingContin- (US$M)genciesW (US$M) W l

1. Raising Schools to Minimum Physical & 355.5 88% 165 82%Operational Standards Institution

Buildinga. Promoting School Autonomyb. Educating and Certifying Teachersc. Supplying Basic Furniture & Equipmentd. Financing School-Managed PhysicalRehabilitation Projects

e. Implementing the Model SchoolProgram2. Establishing a School Development Institution 17 4.3% 9.5 5%Process Buildinga. Designing and Implementing SchoolDevelopment Plans (PDE)b. Financing School Improvement Projects(PME)c. Developing, Testing and ImplementingPedagogic Models3. Promoting Communication and Communication 4 1% 4 2%Social Mobilization & Community

Strengthening

a. Supporting FUNDESCOLA throughCommunication and Disseminationb. Carrying Out Social MobilizationCampaigns _

4. Strengthening National Education Institution 10 2.5% 8 4%Information Systems and Programs Buildinga. Improving Educational Assessmentb. Improving and DisseminatingEducational Informationc. Developing Studies and Research inEducation5. Management and Institutional Institution 13.5 3.4% 13.5 7%Development of Education Systems Buildinga. Strengthening State and MunicipalCollaboration

b. Institutional Development forSecretariats of Educationc. Implementing Microplanning

d. Financing Project Management and ProjectPilot Activities ManagementBank Administrative Fee 2.03 0.5% 2.03 0.9%

TOTAL _ 402.03 100% 202.03 100%

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D. Benefits and target population

The direct beneficiary of FUNDESCOLA II is the primary school-age population currentlyenrolled in public primary education or entering school in the near future in the 19 states servedby the project in the North, Northeast and Center-West (a total of 16.5 million children). Withinthe 27 microregions, program activities will be targeted, to varying degrees, toward 4.7 millionschool children enrolled in 13,500 public primary schools. While the project does not specificallytarget benefits to poor children, its geographic focus, concentration of inputs to worse-off schools,and emphasis on addressing many of the systemic causes of school failure shoulddisproportionately benefit poor children (who suffer disproportionately from low quality schools,high dropout and failure rates). Please see Annex 7 for additional poverty targeting information.

The most important stakeholders for the FUNDESCOLA program are the educationdecision-makers, teachers, and other education specialists who manage and direct the primaryeducation schools and system. In the context of decentralization, it is important that educationmanagers at all levels be qualified in managing the education process and making effective andinformed decisions across a wide range of issues. By providing management tools and training insuch areas as school development processes, minimum operational standards, secretariatmanagement and business plans, teacher career planning, and school mapping, the project willprovide a large number of education professionals with the managerial capabilities they need torun a more autonomous local system (see Summary of Social Assessment, below).

E. Institutional and implementation arrangements:

Implementation period: 5 years, July 1999 through June 2004ExecutingAgency. Brazilian Ministry of Education and Sports (MEC)

FUNDESCOLA II is expected to be implemented over a five year period. A MidtermEvaluation of the FUNDESCOLA program as a whole will be carried out when 50 percent of theloan is disbursed. This is expected to occur on or about March 2001, which would be 18 monthsinto the implementation of FUNDESCOLA II and near the completion of FUNDESCOLA I. A detailedproject Operational Manual is already in use under FUNDESCOLA I and will be adapted underFUNDESCOLA II. Project management arrangements are described below.

1. Centrai level coordination

At the federal level, the Central Project Coordination Unit (DGP) within the FederalMinistry of Education has been responsible for the preparation and will be charged with theadministration of FUNDESCOLA II. The DGP has already demonstrated, through its capableperformance of similar duties under FUNDESCOLA I, that it is institutionally and technically readyto: (a) serve as principal project counterpart to the World Bank and key government andinternational agencies; (b) rely on the state-based Project Executive Coordination (COEP) and onmonitors/supervisors hired to support project implementation at the microregion level; (c) analyzeand approve state, intra-state, and microregion projects and annual work plans; (d) establish andsign agreements with states, municipalities, and other government and international agencies;(e) determine, together with the states, the definition of minimum operational standards;(f) elaborate the annual implementation program based on the microregion programs; (g) conductproject-related regional, state, and micro-planning studies; (h) analyze and submit to the WorldBank the relevant documentation for the acquisition of goods and services and expenditurereceipts; (i) update FUNDESCOLA's Project Operational and Implementation Manual (MOIP); and

18


(j) prepare the progress reports and participate in the mid-term and final review according toWorld Bank procedures.

2. State level coordination

At the state level, FUNDESCOLA operates by means of the Project Executive CoordinationUnit (COEP) within each state education secretariat, which: (a) serves as the key administrativeproject unit at the state level; (b) prepares the Annual Work Plan with the participation of themunicipalities in that state and submits this plan to DGP for approval and registration in the SPA;(c) coordinates project execution across municipalities and state school systems; (d) houses theDGP monitors and supervisors; (e) coordinates communication and cooperation among the localgovernment agencies involved in project-related activities; (f) coordinates teacher certificationprograms; (g) procures goods and services according to the guidelines of the World Bank;(h) records and certifies expenditures; (i) prepares progress reports; and () monitors andevaluates the outputs and outcomes of FUNDESCOLA in each state. As an executive agency COEPwill be established and its members selected and trained at the initiation of the projectimplementation period (states with participating microregions under FUNDESCOLA I already havetheir COEPs in place).

3. Microregion level coordination

At the microregion level, FUNDESCOLA has adopted the IBGE microregion as the bestway to promote collaboration and coordination between municipal and state educationmanagement personnel in each of the municipalities involved, and to maximize efforts andresources within a microregion. The mayors, or their representatives, in conjunction with the statesecretary of education and the state president of National Association of Municipal EducationManagers (UNDIME) are members of the microregion forum which operates as a local planninginstance of the project to: (a) negotiate the priorities within and across the municipal and the stateeducation systems in the microregion; (b) agree on the consolidation of the various municipalaction programs into a single, prioritized microregion action program (PAZ), (c) agree oncommon targets for the microregion action program; (d) plan and monitor the implementation ofthe microregion action program; and (e) and propose the annual implementation program to beapproved by the federal project coordination unit (DGP) and financed by FUNDESCOLA. Themicroregion forum is assisted and advised by a technical group, whose role is to complete therequisite surveys, the preliminary microregion action program, its implementation schedule, andother technical documents. The microregion forums have undergone extensive training by thefederal project coordination unit (DGP) and are well established in each of the project states.

4. Municipal level coordination

At the municipal level, each municipality already participating in the microregion forumis responsible for: (a) designing the municipal action program and schedule, and the municipalannual implementation schedule; (b) assisting schools in designing their own school developmentplan and school improvement projects; (c) fostering the operation of school councils andcommunity participation; (d) actively participating in their microregion forums; (e) developinginter-municipal cooperation within the microregion; and (f) monitoring the delivery of goods andservices procured by the state Project Executive Coordination Units (COEP). Finally, guidanceand training for school leadership in the creation of a school development plan and schoolimprovement project will be offered through municipal-based School Development Teams(GDE). These teams will be composed of municipal education professionals who will themselvesbe trained by the federal (DGP) and state (COEP) level coordination units.

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5. School level coordination

At the school level, a leadership team composed of the principal and the pedagogicalcoordinator or other lead staff at the school will be responsible for: (a) participating inFUNDESCOLA's school development training program; (b) involving the entire staff of the schoolas well as parents in the creation and implementation of a school development plan andcorresponding school improvement projects; (c) accepting visits and technical assistance fromDGP-contracted monitor/supervisors; (d) taking advantage of the ongoing school developmentsupport offered by the school's respective GDE or COEP; (e) managing the use of FUNDESCOLA-transferred funds for implementing the school improvement project, including purchasing goodsand services, maintaining accounting records for these purchases, and providing accountinginformation to DGP during routine audits and review. A more detailed description of theimplementation arrangements, as well as indicators and targets for each subcomponent, can befound in the Project Operations and Implementation Manual (MOIP).

IV. Project Rationale

A. Project alternatives considered and reasons for rejection

A number of alternatives associated with primary education quality, access, andmanagement as well as other education levels were considered. The program strategy,components, and implementation arrangements chosen are those believed to be the most suited tomaximize project effectiveness, educational impact, and sustainability.

1. Alternatives to working in Microregions

Vastly complicating the educational picture in Brazil is the fact that there is no singleeducation system operating in any state or municipality. Instead each state is home to a stateeducation system and hundreds of municipal-run education systems, functioning in parallel in thevast majority of towns and cities, but without coordination or cooperation, and competing forlimited resources. Faced with this situation, most previous education projects and programs inBrazil, whether supported by the World Bank or otherwise, have chosen one of four strategies: (a)projects for municipal education systems, executed by one or more of the 5500 or somunicipalities, either directly or with the Federal Government as coordinator (e.g., the FirstNortheast Basic Education Project-EDURURAL); (b) projects for state education systems,executed by one or more state governments, either directly or with the coordination of the FederalGovernment (e.g., Proqualidade in Minas Gerais); (c) working directly with state governments toexecute projects for state and municipal systems, with obligations and expectations that the stategovernment would assist or influence municipal education systems (e.g., multi-state projects suchas the Second Northeast Basic Education Project); and finally (d) projects executed by NonGovernment Organizations, including the private sector, to assist an extremely limited clientele,but without the involvement of government execution (e.g., UNICEF projects, AmericanChamber of Commerce's education quality projects, and Bradesco Bank projects). None of theseapproaches thus far has proven particularly effective in addressing issues of competition andoverlapping areas of responsibility.

The FUNDESCOLA program is distinct in its approach to these institutional issues. Ratherthan choosing between state and municipal systems, the program works directly with both stateand municipal secretariats of education within a limited geographic area, defined through use of a

20

FUNDESCOLA 1I Project Appraisal Document

microregion planning model. While some of the FUNDESCOLA program activities will be state-wide and involve all municipalities (for example, resource transfer to schools to promoteautonomy, or the PROFORMAQAO program to qualify all uncertified teachers), most programactivities will be directed to selected microregions, and are designed to support the school-baseddevelopment strategy described in section III.A. 1, above. The microregions are defined by theBrazilian Census Bureau's (IBGE's) microregion grouping, and consist of from about five to asmany as 20 or more adjacent municipalities that share many socio-economic interests andcharacteristics.

While the microregion does not constitute an administrative division, it provides a focusfor planning and negotiation among several municipal governments and the state government.Within the boundaries of the microregion, for example, the state and municipal secretariats ofeducation will need to collaborate in the implementation of a survey and planning process to raisea subset of schools (both state and municipal) to minimum operational standards. Administratorsfrom both the state and municipal systems within the microregion will also be trained to supportthe initiation of school development plans in these schools. Social mobilization activities withinthe microregion are designed to create interest in and demand for the school-based developmentapproach. By encouraging states and clusters of municipalities to work together, the programseeks to increase accountability and transparency in the use of resources, as well as facilitatedialogue and learning regarding student results and the school development process.

Also central to the FUNDESCOLA strategy is the decision to concentrate efforts in selected,rather than all microregions. Thus rather than work with all 2,682 municipalities forming part ofthe Northeast, North and Center-West regions, FUNDESCOLA II will work primarily in the 19capital-city microregions of the North, Northeast and Center-West states (covering 146municipalities), and 18 additional microregions in the North and Center-West states (covering anadditional 101 municipalities). The decision to limit the number of microregions, municipalitiesand schools was a pragmatic one: given the project's emphasis on in-depth support for school-level reform, to take on more would seriously strain current implementation capacity.

With regard to the choice of microregions, the inclusion of the capital city microregionswas based on three factors: (a) these regions have the highest concentration of poor familieswithin each state, the greatest degrees of inequality, and levels of extreme poverty comparable toany other microregion; (b) physical proximity between state and municipal education secretariatteams is likely to facilitate collaboration (and project supervision) efforts; and (c) municipaleducation secretariats within the capital cities tend to be better organized than many others,giving the project the opportunity to experiment with reforms within a range of institutionalsettings, including some which from the outset are considered "easier." Although the capital cityand additional microregions selected under the project include both rural and urban areas, theproject's geographic targeting means it is not specifically aimed at solving the problems of theregions' poorest rural schools. Lessons learned from the implementation of the FUNDESCOLAprogram, however, may help address some of these problems in the future. For more informationregarding the use of the microregion concept and program poverty targeting, please see Annex 7.

2. Alternative project designs

Top-down versus bottom-up design. Alternatives for improving the quality of primaryschooling included: (a) implementation of an entirely top-down model in order to ensure greaterconsistency across schools and more effective control at the national level; and (b) establishmentof a completely bottom-up school-driven method for determining needs and resources. The firstalternative was discarded as prior project experience and education sector evaluations havedemonstrated that local interests need to be considered in order to ensure effective

21


implementation and greater sustainability. Time and time again, top-down, input-orientedstrategies have failed to substantially affect the teaching-learning process in the classroom. Such atop-down strategy would also have run counter to recent government commitment todecentralization through such programs as direct school transfer programs, school lunch programsand textbook selection.

The fully bottom-up alternative was rejected based on the evaluation of capacity at theschool level that indicated that school principals are not yet politically or technically capable ofadequately expressing and rapidly attaining their needs for school inputs within the structure ofthe current system. Moreover, without appropriate public demand and accountability, municipaleducation secretariats have not assumed their responsibility for strengthening schools andsupporting quality improvements. In addition, the slow pace of a fully bottom-up approach woulddampen political support for the project in particular and increased school autonomy in general.Furthermore, project components such as coordination of teacher certification and qualityassurance of selected inputs were found to be more cost-effective if carried out at a higher levelthan the school. For these reasons, a more integrated form of project implementation that includesboth top-down and bottom-up methods was selected.

With regard to demand for schooling, an approach similar to the federally funded BolsaEscola program, which gives a minimum salary to needy families provided that they enroll andmaintain their children in school, was considered. However further analysis demonstrates that thistype of program has better chances of success in high quality school systems. Beneficiaryassessment analysis and classroom observation studies (carried out under the "Call to Action"program) demonstrated that children's persistence in school and their parents' expectations abouteducational attainment are low when they believe that the school offers a low quality education.Consequently, this alternative was rejected in favor of a project that attacks the supply-basedproblems of the project's participating microregions, namely the lack of planning, low schoolquality and insufficient school places.

3. Alternative education levels

Preschool programs. The option of including preschool education in the project wasrejected as it would have diverted scarce resources and diluted the impact on primary education.The importance of preschool education programs and their impact on future student success hasbeen examined in Brazil and other countries. Preschool education is currently under investigationby the government as an area for future investment.

Secondary Education: Rates of return to primary education were found to be high, withan average of 13 percent for each additional year of primary school completed. While rates ofreturn to secondary education in Brazil are also very high (in excess of 20 percent), the mainproblem plaguing Brazilian education, particularly in the project's targeted regions, continues tobe how few students manage to satisfactorily complete primary education and move on to thesecondary level. On the other hand, investment in secondary education is being pursued by anumber of state governments, as well as by the federal government, since expansion andimprovement of secondary school places may well serve as an extra incentive for students tofinish the final years of primary school. Given that low completion rates are particularly markedin the Northeast, North and Center-West regions, investment in primary education is stillconsidered to be the most equitable or cost-effective investment.

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B. Major relatedprojects financed by the Bank or other developmentagencies (completed, ongoing, and planned)

Latest SupervisionSector issue Project (Form 590) Ratings

(Bank-financed proects only)Implementation Development

Bank-financed - Progress (IP) Objective (DO)

Primary education access and quality Northeast Basic Completed completedEducation

Primary education quality Urban Basic Education Completed completedProject, "Monhangara"

Primary education access and quality Northeast Basic Completed completedEducation II

Primary education quality Northeast Basic S SEducation III

Primary education quality Innovations in Basic Completed completedEducation

Primary education quality Parana Education S SQuality

Primary education quality Minas Gerais Pro- S Squality

Primary education quality FUNDESCOLA I S SPrimary education quality Bahia Basic Education In preparationPrimary education quality Ceara Integrated In preparation

Education

Early Childhood Development Rio Early Childhood In preparation_ Development

Economic & Sector Work --primary Primary Education in Completed 1997education the Northeast

Economic & Sector Work - early Early Childhood In preparationchildhood education DevelopmentEconomic & Sector Work-secondary Secondary Education In preparationeducationEconomic & Sector Work --teacher Teacher Development In preparationtraining and remuneration

Economic & Sector Work - higher Higher Education In preparationeducation I

Sector Issue Activities StatusOther development agenciesUNICEF Complementary to Bank Projects;

Child Rights focus Support to non-govermnent sector

Ford Foundation Ceara Early Child Development not startedProject

IDB Parana Secondary Education Just startedProfessional Education Just startedSecondary Education not started

Notes: IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory),HU (Highly Unsatisfactory)

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C Lessons learned and reflected in the project design

Following the lessons learned from the design and implementation process ofFUNDESCOLA I (FY1998, Loan 4311-BR)the Northeast Basic Education Project (NEBE ii, FY1993, Loan 3604-BR and NEBE III, FY1994, Loan 3663-BR), and prior Bank experience inBrazil (including EDURURAL), FY1980, Loan 1867-BR), FUNDESCOLA II will incorporate thoseproject aspects that were successful in achieving their intended objectives, avoiding those aspectsthat, upon evaluation, were deemed incomplete or unattainable. These lessons primarily include:(a) a fund design concept for project disbursement; (b) development of specialized trainingmodules for targeted areas, with emphasis on the school; (c) the National Textbook Program(PNLD) evaluation and distribution processes; (d) training programs for education managers; and(e) increased emphasis on communication and social mobilization and the use of incentives tosupport project objectives.

The design of FUNDESCOLA was heavily influenced by the fund design of the NortheastBasic Education Project, which allows for more efficient institutions to draw upon availableresources. This process was found to be very effective in reducing waste, promoting effectiveresource management, and ensuring the arrival of funds to those using them to the greatestadvantage. As proved in the experience of the Northeast Basic Education Project, each state,municipality, and school will be accountable to and coordinate with existing systems managers toensure successful implementation of the project.

International project experience has also influenced the formation of the FUNDESCOLAprogram, including (a) the lessons from Chile, Uruguay, and other Latin American countries inpromoting school improvement projects (PME) for the procurement of context-appropriatematerials and increasing stakeholder input; and (b) the Colombian Escuela Nueva program, whichachieved effective results in the modular use of textbooks, capacity-building of teachers, student-centered learning, evaluation of student attainment, and community participation for multi-gradeschools.

The current nationwide evaluation process of textbooks (PNLD) was adopted anddeveloped by MEC based on the previous experience of the NEBE II and III, which introducedinnovative procurement procedures. The purchase of textbooks is now made through the teachers'choice based on a guide containing titles recommended by education specialists and teachers.This guide classifies the books according to content and pedagogical quality, promotingimprovement by the publishers. Textbook distribution for the entire country has improvedsignificantly since the first delivery made under the Northeast Basic Education projects. Thebooks now arrive at the start of the school year, their arrival in the school is being monitoredthrough a special operation introduced by MEC, and a new delivery system is being implementedby the post office. The selection and delivery of basic school supplies to schools under theFUNDESCOLA projects is modeled after this successful example of local selection combined withcentral procurement and oversight.

To promote effective personnel management in basic education, the project deriveslessons from the positive experience of the Northeast Basic Education Project in the training andcapacity-building of municipal and state secretaries in the Northeast (Municipal EducationSecretaries Support Program [PRASEM]). The project coordination unit will continue to buildupon the success of the Northeast Basic Education Project, especially in termns of effectivemanagement techniques and built-in accountability requirements.

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Finally, the design of FUNDESCOLA II has benefited from the implementation experienceof its sister project, FUNDESCOLA I. Lessons include the need to give higher priority to socialmobilization and communication efforts in promoting the school-based development approach;the benefits to funding a second group of school improvement projects, providing an incentive forschools to stay focussed on the issue of quality improvement and practice the planning skills theyhave learned; and providing incentives for municipalities to expand the school-baseddevelopment approach to additional schools.

D. Indications of borrower commitment and ownership

Government commitment to the FUNDESCOLA program is manifest in: (a) the origins,context and content of the project design; (b) the very good implementation record ofFUNDESCOLA I; and (c) the state of preparedness of FUNDESCOLA II.

The FUNDESCOLA program has its origins in a series of 13 studies of the causes of schoolfailure in the Northeast region of Brazil which formed the basis for the sector study, "Brazil: ACall to Action" published in 1997. The process of conducting and reviewing both the researchand recommendations for this study was a broadly collaborative one, involving the federalgovernment, the World Bank, UNICEF, representatives from federal universities in the Northeast,representatives from political groups concerned with education, including the NationalAssociation of Municipal Education Managers (UNDIME), and state Secretaries of Education.The recommendations contained in the report were widely discussed and agreed, and they formthe basis of the design of many of the FUNDESCOLA activities and strategies. As discussed earlier(see key policy and institutional reforms supported by the project), the FUNDESCOLA programalso directly supports the implementation of a number of important recent changes in the legal,financial and operational framework governing the education sector. Government commitment tothe policy reforms supported through the FUNDESCOLA program has already been demonstrated.

FUNDESCOLA II implementation will benefit directly from the advanced execution of theFUNDESCOLA I project. The fact that 50 percent of the loan has already been disbursed from theFUNDESCOLA I loan demonstrates clearly the high implementation capacity of the project teamand the local executing agencies. More specifically, all of the schools selected to prepare SchoolDevelopment Plans have completed their analysis, established their targets, and detailed theirSchool Improvement Projects. All ten microregion forums have prepared detailed planning andprogramming documents. Detailed classroom-by-classroom school surveys have been completedby the local secretariats of education for all of the schools in the ten microregions of theFUNDESCOLA I project, and the information from these surveys has already been encoded in theeducation microplanning geographic information system. The project management infrastructureat the state and central level is already in place and fully trained. And finally, bidding documentsfor minimum operational standards for the classroom modules have been publishedinternationally.

The status of preparation of FUNDESCOLA II is well advanced. In preparation forFUNDESCOLA II, the DGP has already: (a) discussed the project's proposed design through severalmeetings with state and municipal education staff from all of the capital-city microregions in thenine Northeast states; (b) conducted training for state and municipal govemment staff in theapplication of key instruments for the program; (c) held at least thirty meetings with state andmunicipal representatives to discuss the project's framework and reach agreements on: theparticipation of executors, the creation of the microregion forum, the naming of the project teamin each state, and the time-frame for project execution. In addition FUNDESCOLA was formallypresented and discussed by participating municipal and state secretaries in the three regions

25


through Municipal Education Secretariat's Support Program (PRASEM) seminars, as well asmeetings with the National Council of State Education Secretaries (CONSED).

E. Value Added of Bank Support

Informed Cooperation: As the chief external financing institution in the area of basiceducation over the past ten years, the Bank has had the opportunity to develop a well-informedand close familiarity with the key education challenges in Brazil and has come to recognizewindows of opportunity. More importantly, over the last few years it has built up a fluentdialogue with the leading education authorities and institutions of Brazil. This dialogue has growndespite the presence of ideological differences between a number of the key actors, and acrosschanges in the political landscape. "A Call the Action" and the "PRASEM" workshops areexcellent examples of the Bank's ability to facilitate dialogue and generate consensus aroundcritical issues in the sector. The Bank has also been actively promoting, for Brazilian Ministry,State, and Municipal education leaders and technical staff, the sharing and exchange of ideas oninternational education sector experience. Consequently, the Bank has been able to play the roleof the "honest broker" in policy dialogue, has provided continuity, has promoted the exchange ofinternational experience, and has served as a critical friend in supporting the implementation ofdevelopment projects and policy reform.

The recent cooperation and exchanges developed with Brazil's major national professionalassociations of education managers, the National Council of State Education Secretaries(CONSED) and the National Association of Municipal Education Managers (UTNDIME), havealso provided the Bank with detailed information and analytical perception of local, state andregional needs and demands. Especially important is the Bank's ability to use global knowledgeto create local solutions in the areas of education evaluation and assessment, governance reformsand management restructuring, teacher certification and professional development programs.Derived from experience gathered from supporting basic education projects in other countries,particularly with regard to the school development process, and assembled from the Bank staff'sanalysis of education systems and school reform in England, Scotland, Australia, and the UnitedStates, the Bank is able to share its technical know-how with its clients in Brazil.

Poverty Focus: The World Bank's Brazil-specific project experience and sector work oneducation and poverty have made the institution well prepared to incorporate poverty targetinginto an education project. In particular, lessons from the EDURURAL project (completed in 1990),studies and instruments prepared under the ongoing Northeast Basic Education Project, the 1995poverty assessment, analysis of social spending at the state level, and the urban poverty strategyreport (in process) have facilitated the identification of key poverty and regional imbalance issuesassociated with the education sector. This knowledge base has informed the strategic choicesmade in the design of FUNDESCOLA. The project focuses on Brazil's three poorest regions, theNorth, Northeast and Center-West. However, in the realization that directing resources to poorregions is not sufficient to assure adequate poverty targeting, the project focuses its efforts withinthe three geographic regions on communities where the poor are concentrated. In addition, withinthese microregions, schools with greater needs receive the most project resources. Studentsattending low quality schools are generally those from poorer households. The project's focus onraising all schools to a certain standard and compensating for past inequalities differs fromBrazil's historical approach to equity in spending, which has, at best, centered on providing thesame resources to all.

26


Innovation: Although World Bank-financed projects in Brazil differ from one anothertremendously, all have generated innovation. During the preparation and implementation of thisprogram, the Bank will leverage the success and experience gathered from these innovations,including textbook development and student performance evaluation from the Northeast BasicEducation Projects, school strengthening in the Minas Gerais project, teacher development andaccelerated learning in Sao Paulo, and municipalization in Parana.

V. Summary Project Analysis17

A. Economic Assessment'"

The starting point of FUNDESCOLA II's economic analysis is the fact that high repetitionrates have clogged the flow of students in such a way that both academic achievement and perstudent costs depend primarily on increasing approval rates. The high cost of primary education isrelated to the fact that 19.26 years of enrollment are necessary to produce one eighth gradegraduate,19 instead of the eight that would be necessary if the flow of students were perfect.FUNDESCOLA'S main weapon against high repetition is the School Development Process. The twovariables that will determine how much repetition drops are: (i) the percentage of schoolsundertaking PDEs, which depends on the number of schools raised up to Minimum OperatingStandards and (ii) the average effectiveness of each PDE, based on a pilot experience in MatoGrosso.

The cost-benefit analysis of FUNDESCOLA was undertaken in the following manner: (i) aflow model was estimated for each participating microregion; (ii) a historical trend was applied toproject how the flow of students would look without the project; (iii) the impact of the project onthis flow was estimated using the two key variables described above; (iv) the difference betweenthe two flows was taken; (v) given this difference, the savings in enrollment and increases inacademic achievement were calculated ; (vi) these savings and increases were converted into twomonetary flows up to the year 2012 using per student cost and private rate of return to education;and finally (vii) the internal rates of return for each of the two flows were calculated for five toten and 15 years of project life.

The IRR results are as follows:Scenario Worst Middle Middle Best

Poor GoodSocial IRR after 10 years 1.01% 12.54% 24.26% 39.37%Social IRR after 15 years 9.26% 19.08% 29.23% 42.66%

Even under the most unfortunate and bleak of scenarios, the social rate of return after 15years is quite satisfactory. The reasons for these impressive results is dismal state of the flow ofstudents in Northeast, North and Center-Western schools. High repetition rates make each studentcost two to three times what he might under a perfect flow. The consequence is that even smallincreases in approval rates can have large effects.

17 Detailed assessments are in the project file; see Annex 9.18 See Annex 4.'9 The figures refer to 1996 educational census. This does not mean that the average 8g grade

graduate takes 19 years to finish school, as enrollment years pertaining to those who drop out before 8t arealso counted.

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B. FinancialAssessment 0

Three issues are important in analyzing FUNDESCOLA'S financial impact: (i) whether itplaces an excessive burden upon the Federal treasury; (ii) whether it is financially sustainable,and (iii) what its role will be given the present fiscal crisis. Annex 5 shows that, even when fullydisbursed, the entire FUNDESCOLA program will amount to less than 0.5% of net public debt andless than 0.8% of outstanding Federal debt. Counterpart funds will amount to, at most, onepercent of mandated Federal education expenditures. Sustainability is discussed in Annex 4.FUNDESCOLA will create little or no new expenditure as expansion of the existing school systemis not among its objectives. On the contrary, if its goals are achieved, FUNDESCOLA will lead to amuch more efficient school system and thus save resources.

The present fiscal crisis will, however, have an impact on both FUNDESCOLA II'sfinancing and its relation with other educational investments. The international financial crisis hastransformed a chronic imbalance in public finances into an acute fiscal crisis. This means that allgovernment, including social, expenditure must be cut. FUNDESCOLA II itself has seen its first-year budget reduced from R$ 386 to R$ 199 million. It has been agreed with project managementthat if funds are insufficient to meet yearly project targets, first construction and then furniturepurchases would be deliberately delayed.

On the other hand, given the present context of reduction in social expenditure, the issue ofefficiency resurfaces with great importance as increased efficiency may offset some of thenegative impact of budget reductions. FUNDESCOLA II's objectives are exactly to increase theefficiency of educational expenditure.

C. Technical Assessmentl

[X] Summarize issues below (for example, appropriate technology, costing)[ ] To be defined (indicate how issues will be identified) [] None

During the last three years, curriculum parameters for all lower primary grades wererevised and thoroughly updated and detailed by MEC for use by all schools in the country. Theseparameters cover pedagogical content for all eight grades of primary school. The FUNDESCOLAteacher and staff development programs, and the education materials to be acquired withFUNDESCOLA support, will be evaluated by education experts during project preparation andimplementation to ensure that they are consistent with these curricular parameters.

The decision to use a combined top-down (centralized definition of guidelines andprovision of materials, pedagogical tools) with a bottom-up approach (school selection ofmaterials, development of independent school plans and funding proposals) to improving schoolquality is discussed at greater length in Section IV(A) - Project Rationale. The choice of theschool development plan as a primary means for improving school quality and management isbased on positive experiences in other countries, pilot projects in several Northeast states, andpreliminary experience with FUNDESCOLA I.

Teacher Development. Teacher training under the FUNDESCOLA II project will besupported in three very different ways. First, FUNDESCOLA II will launch the most ambitiouscertification program for uncertified or "lay" teachers that Brazil has ever seen-PROFORMACAO.

20 See also Annex 5.21 See also Annex 9.

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Second, specific staff development needs will be identified in School Development Plans, andtraining activities will be included in the School Improvement Projects. Third, pedagogicalmodels, incorporated as the final step of the school-based development process, require intensetraining and reorientation of the entire school staff around the basic philosophy of the design, andon the implementation of the design by the schools selecting it.

PROFORMAJA2O. At a time when the distance education is commonly confused with theapplication of advanced communication technologies in otherwise unchanged organizations,PROFORMAqcAO will demonstrate one of the most recent innovations in systematic distanceeducation. FUNDESCOLA's PROFORMACAO program will qualify and provide teaching skills to upto 69,000 uncertified but practicing teachers in a model distance learning program. Designed toinitiate a significant number of school teachers in the value of participating in the self-directedprocess of being learners-at-a-distance,. this virtual system uses content experts, technologyspecialists, instruction and learner support, and monitoring and evaluation from a dozencontributing organizations. Managed by a very small administrative unit at MEC whichcoordinates scheduling and distribution of materials, the proposed system is more cost-efficientthan organizations like the Open University (which employs their content, design, andinstructional resource personnel as well as large administrative staff).

Teacher training in School Development Plans. Implementation of the FUNDESCOLA Iproject has demonstrated that specific teacher training is of highest priority to schools. In themajority of the 400 School Improvement Projects under FUNDESCOLA I, school teams werewilling to spend their entire school improvement project budget on teacher improvement. To meetthis demand, private-school teachers or university professors are often contracted to providespecific in-school instruction to practicing teachers in areas such as: "teaching initial reading,""how to teach 2nd grade mathematics." FUNDESCOLA 11 will support an additional 1400 schoolimprovement projects, many if not most of which are likely to include teacher developmentinvestments.

Design-based teacher training. Pedagogical models and designs, such as "Escola Ativa,"require that all school staff participate in intensive training and technical support workshops onthe organizational and pedagogical aspects of the design. As these designs are developed andimplemented by schools, FUNDESCOLA II will support the provision of the specific trainingassociated with them.

D. Institutional Assessment22[X] Summarize issues below (for example, project management, monitoring and

evaluation capacity, administrative regulations)

(a) Executing agencies: Much of the success of FUNDESCOLA II will hinge on thewillingness and capacity of the state and municipal secretaries to cooperate within theenvironment of the microregion forum. In assessing the capacity of the municipal and statesecretaries to coordinate with one another, the experience of the first FUNDESCOLA project is verytelling. The microregion forum has provided an historic opportunity for state and municipalcoordination, with FUNDESCOLA and FUNDEF as incentives. The collective ability of the groupof secretaries in terms of planning, monitoring, procurement and management is much greaterthan that of any one municipal secretary operating independently. The range of experience,education and abilities that each secretary brings to theforum will enrich both the experience of

22 See also Annex 10.

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FUNDESCOLA 1I Project Appraisal Document

the forum members and the product of their efforts, the microregion action plan. Issues ofinstitutional sustainability are addressed below.

(b) Project management: The federal Project Coordination Unit (DGP) has experiencein managing the implementation of the Northeast Basic Education Project, and has also beensuccessfully managing FUNDESCOLA I. An outstanding issue is how much of this managerialexperience at the federal and state level can be eventually absorbed by the parent institutions(MEC and the State Secretariats of Education). This issue is addressed below underSustainability and Risks.

(c) Monitoring and Evaluation: Monitoring and evaluation activities are stronger underFUNDESCOLA II than FUNDESCOLA I. While in most cases the project supports the improvement ofexisting educational monitoring and assessment efforts, specific studies of project implementationand impact have also been included.

(d) The role of UNDP in institutional support. The Ministry of Education will requirehigh levels of technical support in order to effectively carry out its coordination role in Projectmanagement. Likewise, effective transformation of the COEPs and the GDE's into institutionscapable of effectively executing this project will require significant levels specializedmanagement support. FUNDESCOLA II will rely upon the support of the United Nation'sDevelopment Program (UNDP). UNDP's contribution to MEC under the FUNDESCOLA IIProject will involve technical assistance to Ministry staff through, inter alia, the contracting ofconsultants and specialized consulting firms in the areas of strategic planning, design and deliveryof, and support for, project implementation and monitoring systems, the development of theSAEB and national student census database and dissemination systems, and technical assistanceand intensive support services for dissemination and communication programs. With regard tostate and municipal institutional project implementation capacity, UNDP consultants will be usedin the development and support for the Integrated Computerized Information System (SIIG) forstate governments, the design and implementation of the state/municipal microplanning systems,the delivery of training services and support for the PDE and PME for over 247 municipalsecretariats of education and 1,200 schools, and FUNDESCOLA II's institutional development

efforts for state and municipal secretaries of education (PRASEM). Through several years ofcollaboration, the Ministry of Education and all of State Secretariats of Education involved inFUNDESCOLA II Project have established close working relationships with the UNDP. This highdegree of trust and cooperation has led the Ministry of Education to seek continued support fromthis international agency.

E. Social Assessment 23

FUNDESCOLA II's ability to achieve its educational goals as an equity oriented projectmay be affected, both positively and negatively, by various social factors. Three of the mostpositive factors at play are the solid and increasing political support provided by the governmentto basic education, the brand-new and many-faceted national consensus for and commitment toeducation, and parents' continuing demand for educational services for their children in spite of

serious economic constraints.

Studies exploring stakeholder perspectives reveal that there is a widespread belief in thevalue of education, and a general belief among most stakeholders that the quality of primaryeducation needs to be, and can be, improved. Available evidence also suggests that although

economic pressures on poor families and limited access to higher levels of primary education

23 See also Annex 8.

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continue to be problems, poor quality education is the primary reason behind school failure anddropout. For example, 1996 LSMS data indicates that 23 percent of poor 7-14 year olds and 41percent of poor 15-17 years olds who were out of school cited "lack of interest" as their mainreason for not attending, though less than 1 percent of the same group felt they had alreadyattained the desired level of schooling.

There is also a fair degree of overlap in opinions regarding what needs to be changed.Better physical conditions for schools, more and better material and equipment, a more relevantcurriculum, and better qualified teachers are mentioned again and again in interviews across arange of stakeholders. The design of the FUNDESCOLA program takes these perspectives intoaccount, while also attempting to address some of the root causes of the problems identified.Thus, for example, repair of school buildings and equipping of classrooms are included in theproject, within a larger framework of promoting the use of minimum operating standards andstate and municipal cooperation in microregional planning. Teacher training is also included inthe project as described in the technical annex above.

Attitudes and perspectives that present a challenge for the project include: (1) a sense ofdisconnection and lack of shared perspectives between schools and their communities; (2) thelack of a common view among teachers and principals that student learning is their main priority;(3) teacher misperceptions about repetition and literacy teaching; (4) lack of clarity about the roleof the school; (5) the personalization of school failure; and (6) a fairly widespread"disempowerment syndrome" whereby everyone complains about the system, but few (be theyparents or municipal secretaries of education) assume the responsibility for change.FUNDESCOLA's main mechanism for working at the level of the school and community (wheremany of these attitudes prevail) is the school development plan. Conceived as a joint school-community exercise, the school development plan is also the most likely entry point to begin toaddress many of the'issues outlined above. Messages and activities developed under the project'ssocial mobilization and communication component should also help reinforce altemativeperspectives. As a concrete incentive for schools to participate in the school development process,FUNDESCOLA II includes financing for school improvement projects developed as part of theoverall school plan.

At the state and municipal level, the project represents a fairly radical departure from thestatus quo and will doubtless entail a range of attitude and behavioral shifts. By encouragingstates and municipalities to cooperate rather than compete for resources, the project will help toclarify responsibilities and raise issues of accountability that have hitherto been obscured. Thisprocess is likely to have its politically uncomfortable aspects. The challenge for the project willbe to demonstrate to both states and municipalities, that they can "do well by doing right" in theeducational arena. Here again, social mobilization and communications activities included underthe project should be helpful, both in maintaining pressure on political figures to do the rightthing, and in helping to publicize the successes of those that do. Training for state and municipaleducation staff should give them a technical basis for decisions that in the past have tended to beruled by politics. Concrete incentives for municipalities to "buy in to" and expand projectapproaches have also been included in FUNDESCOLA II- for example, a fund to support municipalefforts to expand the school development process outside those schools selected by the project.

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F. EnvironmentalAssessment

Environmental Category [JA [X] B [f C

Component 1 of the FUNDESCOLA project includes school rehabilitation and newschool construction. These are the only two areas that could have potential negativeenvironmental impacts. School rehabilitation will take place on the existing site and the ProjectManagement Unit (DGP) already has written a manual for contractors on rehabilitation projects.New schools will only be financed when indicated by the Microplanning and GeographicInformation System. If the existing school is in too poor shape to be rehabilitated, a new schoolmay be constructed on the same site, after razing the existing building, or on a new site may bespecified if demand for schooling is higher in another area. To address the potential impacts ofnew school construction, the DGP has compiled a manual on site selection, based on itsexperience in the Northeast Basic Education projects, and is in the process of compiling a manualfor contractors. All of the manuals mentioned here will be reviewed by the Bank at negotiationsto ensure that acceptable standards and environmental norms are followed. Finally, the DGP hascommissioned a team of architects to design standard school models for both urban and ruralareas. Municipalities building new schools will choose a model from this set of designs and mustadhere to its specifications. These architectural models will be approved by the Bank as well.

G. Participatory approach 2 4

a. Primary beneficiaries and other affected groups:Stakeholders Identification/Preparation Implementation Operation

State Secretaries of IS + CON IS + CON IS + CON + COLEducationCONSED IS + CON IS + CON IS + CON + COLUNDIME IS + CON IS + CON IS + CON + COLMunicipal Secretaries of IS + CON IS + CON IS + CON + COLEducation

b. Other key stakeholders:Beneficiaries Identification/Preparation Implementation Operation

Students IS IS IS + CONTeachers IS + CON IS + CON IS + CONParent and Community IS + CON IS + CON IS + CON+COLOrganizations I I

(IS, Information Sharing; CON, Consultation; COL, Collaboration)

As mentioned above, the FUNDESCOLA program has been prepared adopting a wide anddetailed participatory strategy. In each of the microregions involved in FUNDESCOLA I and II, theactive involvement of key stakeholders (municipal and state education secretariats, UNDIME,CONSED, and universities, among others) has been channeled to FUNDESCOLA through thefollowing activities: (a) discussion and elaboration of conceptual framework, or a log frame, as adisciplined way to organize and mobilize the project preparation team around a conceptual andoperational instrument; (b) involvement of mayors and the municipal and state secretaries ofeducation in consultation meetings; (c) design of Municipal Education Plans by the municipaleducation secretaries in view of the upcoming project; (d) development, by municipal and state

24 Key stakeholders, how involved, and what they have influenced.

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education secretariats, of a thorough assessment of their schools as compared to the agreedminimum operational standards checklist; and (e) participation in beneficiary assessments carriedout or planned for in all three target regions.

VI. Sustainability and Risks

A. Sustainability

Financial Sustainability: Financial sustainability of the first project is ensured by both theexternal context and internal composition of FUNDESCOLA. The external context of FUNDESCOLAis ensured by its relationship to the FUNDEF. FUNDESCOLA will operate concurrently with theFUNDEF, which automatically transfers resources within each state to assure a minimum per-student expenditure of R$3 15 (1998). With regard to internal composition, financial sustainabilityis ensured by the phasing mechanism of FUNDESCOLA. For school construction FUNDESCOLA IIrequires that the FORUM demonstrate a need for the school through microplanning as well as thefiscal capacity of the jurisdiction to maintain the school and staff. The school developmentprocess encourages the school to manage its own affairs as well as to look to community andstate resources for support, through the school development plan, which must indicate sources offunding (FUNDESCOLA or otherwise) for current and planned projects.

Institutional Sustainability: The strongest argument for the institutional sustainability ofthe FUNDESCOLA program rests in the program's close links to other major national educationprograms and initiatives. Many of FUNDESCOLA's core activities involve training, includingprograms for municipal and state secretariats of education in support of decentralization; trainingfor schools in support of quality improvement goals and school autonomy, as well as key featuresof national education policy. While the training and capacity-building activities are time-bound, itis expected that their results will be sustainable and reinforced through links to wider educationpolicy and requirements.

At the level of the school, it is still unclear how much outside support and incentives willbe required for the school development process to "take" - that is for a focus on school qualityand student results to become a part of school culture. Experience in Mato Grosso and elsewherehas shown that once a school and its community become involved in the school developmentprocess that they are likely to continue. Nevertheless, concerns regarding the sustainability ofchanges at the school level have prompted the decision to incorporate a second round of fundingfor school improvement projects into FUNDESCOLA II. Increased emphasis on socialcommunication and mobilization in support of the school development process should also helpensure the sustainability of school-level reforms.

A second question is whether the benefits of the project's microregion approach (amongthem greater state/municipal cooperation and financial transparency) can be sustained after theproject's close, given that the microregion itself is not an administrative entity. While there areobviously no guarantees, it is reasonable to expect that cooperation under FUNDESCOLA mayfoster a more collaborative and informed culture than has existed in the past. The project'sdeliberate and systematic inclusion of educational actors such as the National Association ofMunicipal Education Managers (UNDIME), the Council of State Secretaries (CONSED) and theuniversity community in project development has helped focus a range of disparate perspectiveson improving system performance. Support for the project among these more permanent entitiesshould also help sustain project momentum in the face of political changes at the local level, asshould the existence of the microregion forum itself.

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Finally, there is the question of project management, which will be handled by projectcoordination units at the federal and state levels. While the location of project coordination unitsinside executing agencies (the Ministry of Education and State Secretariats of Education) charts amiddle course between the pitfalls of an outside Project Implementation Unit (PIU) and thedanger of losing a project within the existing bureaucracies of line ministries and secretariats,there is still the risk of parent institutions "losing" valuable experience once project coordinationunits are disbanded. To minimize this risk, the FUNDESCOLA design emphasizes the coordinationrather than execution role of these units - line ministry and secretariat personnel will be theprimary executors of the project. The fact that state-level and municipal-level personnel will beboth the recipients of training and involved as trainers themselves (under the school developmentprocess) should help ensure that knowledge gained under the project is institutionalized.

B. Critical Risks'5

The FUNDESCOLA program is undeniably an ambitious one. Critical risks to the projectinclude the assumption that the current political commitment to improving primary education onthe part of the federal government and many state governments will hold, despite Brazil's havingentered another period of economic and perhaps political instability. A long period of economichardship is likely to shift families' evaluation of the costs and benefits of additional schooling,and perhaps also divert energies and attention away from efforts to improve school quality, Tightbudgets are also likely to delay progress on improving teacher salaries. Abandonment of theFUNDEF in the face of federal and state financial disputes would also seriously compromiseproject implementation.

Beyond the multiple risks associated with economic instability, resistance to increasedschool autonomy is likely to surface at both the state and municipal levels. And even if politicalcommitment at the leadership level is strong, commitment and technical skills at all levels (withinschools and education secretariats) may be insufficient to effect dramatic changes. Difficulties insupplying good-quality teacher training may also prove to be a bottleneck to improvingeducational outcomes. Although the project design has attempted to compensate for these risks asmuch as possible, they will need to be monitored throughout project implementation, andmodifications made to the project design as necessary. The main risks are summarized below:

25 Reflecting assumptions in the fourth column of Annex 1.

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Risk Risk Rating Risk Minimization MeasureLack of political commitment and technical support N Social Marketing fostersof state and municipal education secretariats. community pressure for change.Low level of cooperation among the state and M Microregion forum and requiredmunicipal systems. cooperation.Lack of commitment of the school team and low M Fostering community supportcommunity participation. through various media.End of decentralization efforts on the part of federal N Political awareness of success atgovernment. local level.

Failure to implement the FUNDEF. M Understanding on the part ofsecretariats of the re-distributivevalue of the Fund.

Lack of community and political commitment for M Social Marketing.reform including demand for quality services, socialmobilization, and monitoring.Low commitment for improving the educational M Fostering of social awarenessexperience as a means of poverty reduction and through publication of successnational development. of project.

Overall Risk Rating MRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or

Low Risk)

VII. Main Loan Conditions

A. Effectiveness Conditions

The following four items are the loan effectiveness conditions:

(a) that at least two Participation Agreements with Participating States andMunicipalities located in the Center-West Region comprising three ParticipatingMicroregions have been entered into among the relevant parties;

(b) that at least four Participation Agreements with Participating States andMunicipalities located in the North Region comprising five Participating Microregionshave been entered into among the relevant parties;

(c) that at least five Participation Agreements with Participating States andMunicipalities located in the Northeast Region comprising five ParticipatingMicroregions have been entered into among the relevant parties; and

(d) that the MOIP has been furnished to the Bank.

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VIII. Readiness for Implementation

[ ] The engineering design documents for the first year's activities are complete and readyfor the start of project implementation. [X] Not applicable.

[]The procurement documents for the first year's activities are complete and ready forthe start of project implementation.

[X] The Project Operations and Implementation Manual has been appraised and found tobe realistic and of satisfactory quality.

IX. Compliance with Bank Policies

This project complies with all applicable Bank policies, especially those indicated below:

] Indigenous peoples [ Riparian water rights] Cultural property [ Financial management

[x] Environmental impacts [ ] Financing of recurrent costs[ ] Natural habitats [x] Local cost sharing[x] Gender issues [x] Cost-sharing above country three-year average[ ] Involuntary resettlement [x] Retroactive financing above normal limit[ ] NGO involvement [ ] Disputed territory

[x] Other (provide necessary details)

Task Team Leader: Robin S. Horn, LCSHD

Sector Manager/Director: Xavier Coll, LCSHD

Country Manager/Director: Gobind T. Nankani, LCC5C

36

FUNDESCOLA 11 Annex 1Project Logframe

Annex 1FUNDESCOLA II

Project Logframe

Narative Smy03Cts_NartieSnmaiy Key Per$oruac indicators Monitoringmad Evaluation Critical AswumptionsSector-related CAS Goal: (from Goal to Bank Mission)

Achieve universal primary Increased average years of IBGE and IPEA reports. Significant commitment oneducation by 2007 and schooling for economically the part of the populationimprove academic active population in and Govermnent to pursueperformance in basic targeted regions. targeted educational effortssubjects, particularly that will contribute toPortuguese and Increased percentage of improving educationalmathematics. youth that have completed access, completion, and

primary school in the labor quality outcomes for themarket in targeted regions. poor.

Higher standard of livingfor youth in targetedregions.

Development Objective: (Key Performance (from DevelopmentIndicators, by June 2007) Objectives to CAS Goal):

Improved educational Increase the proportion of INEP-SAEB and ENEM Economic Stabilityoutcomes of children fourth grade students reports, and annualenrolled in public schools meeting acceptable learning report on school Availability of employmentin the targeted areas of the standards in Portuguese indicators from INEP. for primary schoolNorth, Northeast, and from 28.3% (N), 32.8% graduates.Center West regions. (NE) and 36.7% (CW) in

1997 to 50% in 2007 in the Availability of adequateProject's targeted areas; number of quality secondary.

school places.Increase the proportion of INEP School census.eighth grade students DGP's SPA Understanding by parents ofmeeting acceptable learning Reports from CGE and the social and economicstandards in Portuguese CPE of INEP. importance of primaryfrom 43.6% (N), 43.8% education and the(NE) and 54.9% (CW) in importance of ensuring that1997 to 60% in 2007 in the their children learn enoughProject's targeted areas. to be promoted each year.

(Leading perfornance Recognition by politicians,indicator, by June 2004) business, and the general

population of the importanceIncrease the average of stimulating the educationpromotion rates in primary profile of the young.school from 64.2% (N),64.7% (NE) and 71.5% Municipal secretaries with(CW) in 1997 to 85% in technical, administrative,2003 in the Project's and financial conditions totargeted areas. operate systems, programs,

and methods used by project.

37

FUNDESCOLA 11 Annex IProject Logframe

NFrrati~S~um~aiy _ _ n~i_dc*tor~ ~mit~rliig ae77Output:

1. School quality raised 1.1 All schools with more INEP School census. Schools willing and able totowards operational than 20 students in N, NE adopt effective methods andstandards in targeted areas. and CW in receipt of direct DGP's SPA. educational designs to

school transfer funds. improve educational results.COEP reports from OE

1.2 15,000 classrooms LSE compiled by CPE. Increased demand by therehabilitated in the targeted public for higher qualitymicroregions. CIE/DGP reports. schooling and greater

learning.1.3 15,000 classroomsmeeting minimum Adoption of career plans byoperational standards. state and municipal

secretariats.1.4 Number of uncertifiedteachers in classrooms Integration of state andreduced by 75%. municipal secretariats to

supply better schools.2. School-based 2.1 1,150 schools with PDEDevelopment Process implemented. Availability of financialimplemented in targeted resources and political willareas. 2.2 1,350 schools with from state and municipal

PME implemented. education secretariats togrant autonomy to schools

2.3 2,000 rural schools withpedagogic models Municipal secretaries withimplemented. technical, administrative,

and financial conditions to3. Social Mobilization 3.1 Social mobilization operate systems, programs,campaign implemented. campaign in targeted areas and methods used by project.

reaching 75% of populationby 2002. Availability of institutions in

target areas who can supply3.2 Three workshops held teaching/learningw/each microregion forum improvement programs.to establish agreements &disseminate objectives andmethods of FUNDESCOLAProgram.

4. National education 4.1 60% of students ininformation system targeted regions enrolled inestablished and operational. schools that receive annual

education indicator reports

4.2. At least 1 Kit w/standardized studentachievement testsdeveloped and tested.

38

FUNDESCOLA 11 Annex IProject Logframe

Narrative SumrKy PerformanceIniators Monitorg and Evaluation Critial Assumptions4.3 Recommendations ofapplied researchdisseminated to DGP &incorporated inFUNDESCOLA III design.

5. Management of schools 5.1 Secretariat Managementand education system and Business Planimproved. implemented in two

secretariats of education.

5.2 Microplanning andGeographic InformationSystem implemented intargeted areas.

5.3 70% of secretaries ofeducation directors intargeted areas trained.

5.4 25% of school directorswho have adopted PDEtrained in schoolmanagement.

Components andSubcomponents:

1. Raising Schools to 355.5 millionMinimum OperationalStandards

A. Promoting SchoolAutonomy

B. Educating andCertifying Teachers

C. Supplying BasicFumiture andEquipment

D. Financing School-Managed PhysicalRehabilitation Projects

E. Implementing theModel School Program

2. Establishing a School 17.0 millionDevelopment Process

A. Designing andImplementing SchoolDevelopment Plans(PDE)

39

FUNDESCOLA II Annex 1Project Logframe

B. Financing SchoolImprovement Projects(PME)

C. Developing, Testing,and ImplementingPedagogic Models

3. Promoting 4.0 millionCommunication and SocialMobilizationA. Supporting

FUNDESCOLA through

Communication andDissemination

B. Carrying Out SocialMobilizationCampaigns

4. Strengthening National 10 millionEducation InformationSystems and Progrars

A. Improving EducationalAssessment

B. Improving andDisseminatingEducationalInformation

C. Developing Studies andResearch in Education

5. Management and 13.5 millionInstitutional Developmentof Education Systems

A. Strengthening State andMunicipalCollaboration

B. InstitutionalDevelopment forSecretariats ofEducation

C. ImplementingMicroplanning

D. Project Administrationand Pilot Activities

40

FUNDESCOLA II Annex 2Detailed Project Description

Annex 2FUNDESCOLAII

Detailed Project Description

FUNDESCOLA PROGRAMAND PROJECTS

FUNDESCOLA II is the second project within a medium-range and more comprehensiveprogram designed to support primary education in the nineteen states of the North, Northeast, andCenter-West regions of Brazil. Whereas FUNDESCOLA I finances start-up activities in the tencapital microregions of the North and Center-West, FUNDESCOLA II will initiate project activitiesin the nine capital microregions of the Northeast, and an additional eight microregions in theNorth and Center-West. FUNDESCOLA II will also provide continued financing for ongoingactivities undertaken as part of FUNDESCOLA I (for a discussion of the microregion concept, seebelow, as well as Section I1 (A) of the main text and Annex 7).

All of the FUNDESCOLA projects will pursue the same development objective, namely: toimprove the educational outcomes of children enrolled in primary schools in selected areas of theNorth, Northeast, and Center-West regions of Brazil, as measured by increases in primary schoolpromotion rates, as well as achievement levels of children in these regions. The projects comprisemany of the same activities and adopt the same overall strategy and decision-making process, asdescribed below. Apart from geographic emphasis and timing, the main differences betweenFUNDESCOLA I and II include:

* Component organization. Activities in FUNDESCOLA II have been re-grouped to betterreflect the overall program strategy, provide a sustainable foundation, and link the first andthird projects;

* Greater understanding of school development process. FUNDESCOLA II reflects a deeperunderstanding of the school development process and sharpened overall program strategy,gained from experience under FUNDESCOLA I;

* Implementation of pedagogic models. FUNDESCOLA II includes the implementation ofpedagogic approaches already tested under FUNDESCOLA I, and the development anddissemination of new approaches to improve the teaching-learning process at the schoollevel;

* Building institutional capacity. FUNDESCOLA II expands the program of secretariat-basedinstitutional development initiated in FUNDESCOLA I. In partnership with selected secretariatsof education, the Project will help these institutions to integrate key elements of theFUNDESCOLA program into their administrative structures, technical procedures and decision-making processes, and give top priority to school strengthening.

* Greater emphasis on social mobilization. A lesson from FUNDESCOLA I is that more needsto be done to encourage changes in existing educational culture. FUNDESCOLA II thereforeincludes more emphasis on social communication and mobilization, including thedevelopment of new materials for program dissemination and the promotion of a network ofagents to mobilize the main stakeholders towards the strategies of the program;

* Financing for construction. FUNDESCOLA I includes preliminary planning activities anddevelopment of architectural plans, but no financing for construction. FUNDESCOLA IIincludes financing for construction of new schools, with priority given to substitution andreplacement of unsalvageable schools in all microregions covered by the two projects;

41


* Financing for teacher certification. FUNDESCOLA I iS financing the development ofcertification training programs; FUNDESCOLA II will finance implementation in all threeregions;

* Expanded program and project evaluation. FUNDESCOLA II will finance a program ofresearch and studies in education, with particular emphasis on the evaluation of projectimplementation and impact.

FUNDESCOLA STRATEGY

The FUNDESCOLA program starts from the premise that children's educationalperformance is determnined by the quality of the schools they attend. More specifically, it is afunction of: (a) the knowledge, practices and commitment of the school's principal and staff; (b)the school's learning conditions; (c) information on educational results made available to parentsand the public; (d) parent and community support for education and schooling; and (e) thesupport given to the schools by the respective Education Secretariat. In order to improve theperformance of the public elementary education system within the North, Northeast and Center-West regions of Brazil, therefore, the FUNDESCOLA program works at both the level of the schooland the level of the several institutions (state, municipal and federal) that support the school. TheProject's design is a hybrid of both top-down and bottom-up approaches to improving schoolquality: bottom-up in promoting greater school autonomy and involvement in solving quality-related problems; top-down in establishing a baseline for school operation, providing inputs toreduce inequalities among them, and involving supporting institutions in FUNDESCOLA's school-based development strategy.

The principal objective of the school-based development strategy is to transformthousands of poorly performing schools into high quality, effective institutions in which studentlearning is prioritized and the elusive goal of success for all students is pursued. There are fiveparts to this strategy, which will be phased in over time.

As a first step toward increasing school autonomy, all schools with more than 20 studentsin the project regions will receive a small discretionary budget through a direct transfer from thefederal government. Second, the strategy will address the poor conditions in many schoolsthrough support to states and municipalities in establishing "minimum operational standards" forschools - a checklist of very basic items a school must have in order to function. The Project willalso provide teacher certification, furniture, equipment, rehabilitation and construction support fora limited number of schools to bring them closer to minimum operational standards. Third, theProject will work with selected schools to create school development plans. This is an intensive,institutional development process at the school level, involving the entire school community,including parents and students. Fourth, the Project will finance school improvement projectsarising out of the individual school development plans. Finally, the Project will finance thedevelopment and implementation of a number of pedagogical and organizational models designedto improve the teaching-learning process, as even those schools with the required resources,physical conditions, and commitment to improving educational outcomes may lack the technicalknowledge and skills to do so.

Given the geographic breadth of the Project, project activities will be undertakenselectively. While some project activities will be statewide, involving all municipalities andschools, the bulk of project activities and inputs will be directed to selected microregions. Amicroregion consists of a grouping of neighboring municipalities with similar socio-economicprofiles and interests, as defined by the IBGE.

42


GRAPHIC 2.1 FUNDESCOLA I INPUTS AND SERVICES

STATE LEVEL' All schools get direct fundingt All unqualified teachers get qualification

M Mobilization campaign to expandFUNDESCOLAstrategy

t Educational assessment (representativeSample of Schools)All schools receive report cards oneducation indicators STATE Capital

/ / ~~~~Micro-|Region I

Micro Micro/Region It1 Region 1 MICROREGION I Key:

El State SchoolA Munidpai School

MICROREGION LEVEL a

* Furniture and equipment E El A * School-managed physical rehabilitation A AMunicipaity

-Substitution of substandard schools A ICapital city)

- Training & support for School Development j ElPlans (PDE)

* Training & support for School Improvement Projects A El/ A Municipality

* Communication to support FUNDESCOLA Program A El B

* Research studies on sample of schools A A EA

A s N /MunicipalityC

MUNICIPAL LEVEL

All schools receive direct financing MUNICIPALITY C

Support for PDE and schoolimprovement prolect

Fumiture, equipment, teacher qualification

'Escola Ativa'Fumiture, equipment, and funding for rehabilitation

Support for PDE and schoolimprovement project only Construction of new school, based on microplanning

Pilots school-based pedagogic models and designs

43


While not an administrative entity, the Microregion provides a basis for planning andnegotiation among municipal governments and the state government. The FUNDESCOLA projectswork with all municipalities within the selected microregions, as well as with both municipal andstate schools. Here again, there will be a selection process. All schools within the microregionwill receive some benefit from the Project, but not all will receive the same inputs. What schoolsreceive, whether physical upgrading, materials, and/or assistance in developing a school plan, willdepend upon the results of the schoolfacilities survey (LSE).

Graphic 2.1 portrays schematically how the benefits of the FUNDESCOLA components aredistributed to schools and education professionals in the states, microregions, and municipalitiesserved by the Project. The top figure (representing a typical state in the FUNDESCOLA region)shows that all schools in the state (both municipal- and state-run) will benefit from directfinancial transfers (Component IA) and that all uncertified teachers will have access to thePROFORMAQAO distance teacher qualification program (1B). In addition, social mobilizationactivities (3B) designed to promote the strategy of school-based development and training formunicipal Secretaries of Education (5A) will be provided to every municipality in the state.Finally, the entire state will participate in educational assessment, school census, anddissemination of school performance data (4).

The middle figure represents a typical FUNDESCOLA-targeted microregion. State andmunicipal schools from all of the municipalities in the targeted microregion will receive furnitureand equipment (1C). Schools from across the microregion that need to be rehabilitated willreceive funding for this purpose and technical support for contracting these services (ID).Unsalvageable schools in the microregion will be substituted by new schools (1E) whenmicroplanning indicates a need to do so, and when the Microregion Fcrum (see below) endorsessuch an action. In the microregion, all municipal secretariats of education will receive trainingand support to help schools design and implement school development plans (2A) and schoolimprovement projects (2B).

The third figure shows how, in any given municipality, different schools receive differentbenefits from the Project. For example, rural schools may adopt the "Escola Ativa" design.Schools with a damaged roof or other severe physical problems would receive finances toundertake repairs. Some schools will receive direct support from the Project in developing andimplementing School Development Plans and School Improvement Projects. Decisions aboutwhich schools receive what kinds of benefits will be based on two main factors: (a) a technicalanalysis and ranking of schools based on the data collected in the Minimum Operations Standardsschool survey (the LSE); and (b) recommendations from the collective review processes of theMicroregion Forum.

FUNDESCOLA H COMPONENTS

COMPONENT I: RAISING SCHOOLS TO MINIMUM OPERA TIONAL STANDARDS

Objective

This component will provide inputs and services to bring schools in each participatingmunicipality closer to meeting minimum operational standards. The minimum operationalstandards model is an input-based framework for improving educational equity with respect tothe basic prerequisites of schooling. It is also a starting place for the improvement of educationalquality. The rationale for this approach is based on the tremendous intra-municipal andmicroregional disparities in school quality. Although all of the microregions are home to someadequate quality schools, large numbers of children attend class in buildings that simply should

44


not be called schools as they do not provide even the most minimal conditions for teaching andlearning.

The minimum operational standards model is designed to operationalize the concept of afunctioning school. It consists of an agreed-upon, pre-deterrnined set of essential staffingrequirements, inputs and conditions needed for a school to be considered "operational." The keyinstrument for implementing this model is a simple checklist of the teaching requirements, inputsand services needed for a school to carry out its basic functions. The items included in thechecklist vary with the size of the school. For example, a very small school can operate without amain office or a school library, whereas a large school would need these facilities in order tofunction properly. The checklist is the basis for the school facilities survey (LSE), whichdetermines if the school meets or falls short of the minimum operational standard.

A school operating at the minimum operational standard is one that is consideredminimally capable of providing satisfactory conditions for student learning. The model assumesthat a school must have all of the minimum inputs and services present in order to achieve theminimum operational standards status. Although schools and their secretariats can and shouldseek to provide improvements above these thresholds in order to enrich the learning environment,schools unable to offer these essential factors simply cannot provide an adequate opportunity forchildren to learn. The overall objective of the component therefore is to bring schools closer tomeeting these minimum thresholds.

Definition of Minimum Operational Standards

FUNDESCOLA defines a school operating at the minimum operational standard as onecharacterized by the following conditions:

* the school staff and community are familiar with the minimum operational standards modeland checklist, and understand the equity considerations associated with this model;

* all students have access to basic textbooks and reading books, and all teachers have access toteaching guides;2

X all teachers are minimally qualified under the law;

* all classrooms have a minimum set of furniture and equipment,

* all classrooms have access to basic teaching materials;

* the school offers the minimum physical conditions to permit it to receive or maintain theinputs and services indicated above.

States and municipalities are encouraged to develop their own minimum operating standards. Care will betaken, however, to ensure that these are in conformity with federal guidelines prepared by the Ministry ofEducation.

2 The Ministry of Education regularly delivers these teaching inputs which therefore have not been includedin the FUNDESCOLA I and II projects.

45

FUNDESCOLA 11 Annex 2Detailed Project Description

Subcomponent A: Promoting School Autonomy

With the objective of promoting greater school autonomy, this subcomponent willprovide a small discretionary budget, based on school enrollment, (approximately US$7.00 perstudent on a yearly basis) to all schools with more than 20 students in the Northeast, North, andCenter-West regions through direct transfer from the federal government. This procedure isregulated by federal legislation that establishes the criteria, conditions and processes for financingthe schools directly ("Medida Provis6ria 1748-1 de 13/01/99" and "Resolu,co do FNDE de21/01/99"). Having some autonomy over budgets is considered a crucial step towards makingschools increasingly accountable to educational results, and in giving schools the means tocontinue to work towards meeting minimum operational standards. Normally, schools willreceive these funds directly into a school bank account managed by their school council.Composed of parents and the school principal, the council will be responsible for makingdecisions about how to spend the funds, comparison shopping, ordering and receiving the goodsand services, and keeping the accounting records up-to-date. If a school does not have a bankaccount, funds designated for the school's exclusive use will be received by the relevant Mayor'sOffice on the school's behalf. Funds will be used, inter-alia, for the purchase of instructionalmaterials and supplies, as well as for minor repair and maintenance. Acceptable purchases arerecommended by the legislation, while those schools within the project microregions are advisedto procure services and goods which will help them to attain the minimum operational standards.The project will provide each school with recommendations on what to purchase. Specifically,each school will receive a personalized letter from the Minister of Education, along with a school-customized version of the minimum operational standards checklist.

Subcomponent B: Educating and Certifying Teachers

At the end of the year 2001, it will be illegal under the National Education Law for statesor municipalities to have individuals employed as classroom teachers if they have not beencertified. In the Project's three regions there are today 96,000 uncertified teachers (pre-school tograde four); comprising 91 percent of all primary uncertified in Brazil. Although state andmunicipal initiatives to address this issue are being undertaken using FUNDEF funds, the federalgovernment is preparing a more comprehensive program for attending to the deficiencies ineducational background of large numbers of these uncertified teachers. This subcomponent willsupport the implementation of the PROFORMAQ(AO certification program (designed and testedunder FUNDESCOLA I) for teachers who do not meet the minimum legal requirements to teachgrades one through four. The program will be offered to all 19 states, however participation willdepend upon states' interest and commitment to implementing the program.

The program, conceived and coordinated by MEC, is being developed based on adistance education modality with the support of decentralized structures at the state and municipallevel. A set of tailor-made standard self-instructional materials will promote a practical approachand critical thinking about pedagogical actions. At the federal level, the Ministry of EducationSecretary of Distance Education - SEED, the Secretary of Elementary Education - SEF and theCentral Coordination Unit - DGP are responsible for the overall proposal and strategy,preparation and development of the instructional materials, and institutional coordination,monitoring and evaluation. At the state level, the Coordination Unit at the state secretariat ofeducation, and implementing agencies, primarily Normal Schools, will house tutors andparticipants and support program activities. Also at the state level, a Committee for TeacherCertification, composed of representatives of the state secretariat of education, the state educationcouncil, UNDIME and education municipal units (OME) will monitor and coordinate programactivities. At the municipal level a local Coordination Unit will coordinate the educationmunicipal units (OME), school and tutors.

46

FUNDESCOLA 11 Annex 2Detailed Project Description

As part of the FUNDESCOLA I, the materials are being prepared and developed by MEC anda pilot project is being implemented in two Center-West states, with the support of consultantsand specialists. The monitoring and evaluation of this first initiative: the strategy, instruments andmanagement structure, will be validated and made available to other states and municipalities thatcan participate in the program, under FUNDESCOLA II, as long as they have interest and areeligible according to the criteria and management conditions defined. The states andmunicipalities that participate in the program will become Implementing Agents of thisSubcomponent under the coordination of SEED. In addition to Proformacao, this subcomponentwill provide support for the production of videotapes and related material for SEED's School-TV(TV-Escola) distance teacher education program.

Subcomponent C: Supplying Basic Furniture and Equipment

This subcomponent will support the acquisition of basic furniture and equipment, asdefined in the minimum operational standards checklist, to allow classrooms to function in asatisfactory manner. Classroom items include, inter alia, chalkboards, student desks and chairs,teacher desks and chairs, bookshelves, and storage closets. Particular attention will be given todurability and ergonomic specifications, as well as the flexible use of chairs, desks, and tables inthe classroom, and possible mobility of the chalkboard. The provision of furniture and equipmentwill be limited to schools that are below minimum operational standards, enroll more than 20students, and count on the support of a Unidade Executora, and meet the physical conditions forreceiving these inputs. Schools that do not posses the minimum physical infrastructure to receivethese inputs, but meet all other criteria, will benefit from classroom rehabilitation (describedbelow). These conditions, as well as the need for inputs, will be verified by the schoolfacilitiessurvey (LSE), undertaken in all schools in the targeted microregions. This subcomponent willserve schools located in the 17 FUNDESCOLA II targeted microregions only. Approximately 20percent of the schools and 70 percent of the students in the targeted microregions will benefitfrom these investments.

Subcomponent D: Financing School-Managed Physical Rehabilitation Projects

This subcomponent will provide both financing and engineering support to schools inneed of renovation in order to help them attain minimum operational standards. Schools thatenroll more than 20 students within the targeted microregions, maintain a Unidade Executora,and are below the minimum operational standards are eligible for rehabilitation. Prioritization andselection of schools will be conducted as part of the microregion planning process, with the directinvolvement of the State Secretary of Education and the mayors from all of the microregion'smunicipalities. Schools themselves will receive the financing and will be responsible forcontracting and managing the rehabilitation services (using the same participatory andmanagement arrangements described in Subcomponent 1(A), above). All renovations will besubject to supervision by the DGP. This subcomponent will serve schools located in the 17targeted microregions only. Approximately 10 percent of the schools and 25 percent of thestudents in the targeted microregions will benefit from these investments.

Subcomponent E: Implementing the Model School Program

The overall objective of this subcomponent is to help states and municipalities in eachmicroregion rationalize the allocation of students across the existing public school network. Withthis objective in mind, the Project may identify the need to replace some existing schools or toconstruct a limited number of new schools. All such decisions will be technically justified on thebasis of results from the School Survey (LSE) and the Microplanning process The Project willmake every effort to: a) substitute schools that would not be cost-effective to repair; b) correct

47


distortions by reorganizing supply to better attend to demand; and c) expand system access inareas Where the school-age population is not attending school at all.

A Participation Agreement between the local jurisdiction and the DGP will demonstratethat each new or replacement school to be constructed: (a) is included in the relevant multi-yearplan based on the school network microplanning inforrnation system and in the MicroregionAction Program; (b) will be established with the agreement of the relevant Forum and the DGP;(c) will be built using a standardized architectural plan; (d) has a specified jurisdictional authority(State or Municipality) that can demonstrate adequate fiscal capacity to absorb the costs ofrunning the school and has the land and rights in respect to the land required for the constructionof the new school; and (e) will be staffed by certified teachers and will meet all other minimumoperational standards.

COMPONENT 2: ESTABLISHING A SCHOOL DEVELOPMENT PROCESS

Objective

This component will promote the development of a school-centered planning anddecision-making process for school improvement. The primary tool in this process will be thecreation of a school development plan or PDE. It is expected that a majority, though not all of theschools in adequate condition to have received furniture and materials under the Project willdevelop a PDE. As part of the PDE, schools will propose a school improvement project (PME),which will be initially financed under the FUNDESCOLA program. This component will alsosupport the development of instruments (i.e., manuals and training materials), and skills forschool teams and for state and municipal education secretariats to manage the entire process.Finally, with the rationale that even schools newly focussed on improving teaching and leamingmay lack the knowledge and skills to do so, the Project will support the development anddissemination of new teaching-learning designs to help schools improve student learning.

The main objectives of this component are to: (a) develop within schools a process ofeducational planning and local empowerment to improve school quality and efficiency; (b) toprepare both state and municipal education secretariats to guide, evaluate, facilitate and supervisethe design and implementation of the school development plans and school improvementprojects; and (c) to implement new teaching-learning designs to help school staff improve studentachievement.

Subcomponent A: Designing and Implementing School Development Plans (PDE)

The school development plan (PDE) is a quality-oriented, multi-year school-developedstrategic plan aimed at improving student outcomes and school quality. Through the use ofFUNDESCOLA'S school development plan, the school defines its own values, mission, goals,strategies, educational targets and responsibilities, with the participation of the parent community.It also defines the conditions and resources, including financial and staff, needed to meet theschool-specified targets. The PDE is the culmination of one process-diagnosis and strategyformulation, and the guide for a subsequent process-school improvement. Once agreed upon,the PDE serves as a step-by-step guide to the implementation of the school improvement strategyand the school improvement projects (PMEs) (see below).

This subcomponent will train state and municipal education secretariat staff from all of thejurisdictions in each of the 17 new microregions. In addition, school principals from at least 1000schools distributed across these microregions will participate in intensive PDE trainingworkshops.

48

FUNDESCOLAII Annex 2Detailed Project Description

Subcomponent B: Financing School Improvement Projects (PME)

The school improvement project (PME) is a section of the school development plan thatthe school can use to apply for financing from FUNDESCOLA in order to implement selectedactions. The school uses the PME to indicate the project inputs, services, or training activities itneeds to achieve the school development plan targets. While the minimum operational standardsmodel is designed to equalize the school environment, the school improvement project aims toindividualize the school by responding to school-specific initiatives in order to improve studentlearning and school quality.

Financing of school improvement projects will take place in two phases. In the firstphase, all schools submitting school improvement projects will receive project financing,providing the proposals observe basic program guidelines. In the second phase schools willundergo a competitive selection process. FUNDESCOLA II will finance Phase I school improvementprojects in the Northeast region, and in the eight additional microregions in the North and Center-West, and Phase II school improvement projects in the original ten microregions covered underFUNDESCOLA I. For Phase II schools, the Microregion Forum will rank the quality of schoolimprovement projects, following FUNDESCOLA guidelines, in terms of consistency with projectobjectives and procedures, coherency with the school development plan, focus on studentachievement and performance, and anticipated speed of implementation. Then the 50 percent top-ranked school improvement projects will receive full funding. School improvement projects aremeant to be executed in one year. It is expected that no project will exceed US$8,000 annually intotal cost. Only those schools with more than 200 students, a school council and a bank accountare entitled to receive FUNDESCOLA II financing for school improvement projects.

Subcomponent C: Developing, Testing and Implementing Pedagogical Models

Bringing schools closer to minimum operational standards and focussing attention onquality by means of a school development plan and school improvement projects are the buildingblocks of the FUNDESCOLA school improvement strategy. Nonetheless, even when a school isadequately supplied with basic materials and is committed to improving educational outcomes,teachers and principals may still lack the requisite knowledge to improve actual classroominstruction, and hence children's learning. For instance, teachers may be either out of touch with,or inadequately familiar with, the content they are teaching or with content-specific pedagogicaltechniques. Given the generally limited educational background of many teachers in the threeproject regions, this lack of technical knowledge and skills is a likely barrier to improvedchildren's learning and success in school, even with the best of intentions and the highest ofexpectations and commitment.

Consequently, this subcomponent will support the elaboration, testing, dissemination, andin some cases implementation of a variety of pedagogical models for improving studentachievement through changes in school organization, curriculum and instruction. All of themodels developed under this subcomponent will be made available on an optional basis toschools and secretariats of education. The ultimate objective is to develop a menu of provenapproaches that would allow schools to choose a model that best fits with their own philosophyand interests.

Although they will vary from one another, all models will include certain common elements.For instance, each model should:

* focus on school improvement as measured by student learning achievement or promotionrates;

* set high learning standards for all students in all grade levels,

* incorporate an operational version of the National Curriculum Parameters developed by the

49


Ministry of Education;

* include regular diagnostic student assessment linked to the National Curriculum Parameters,developed by INEP;

* be supported by a program of assistance and professional development for teachers and stafforiented to both design implementation and teaching content; and

* include guidelines for using resources more effectively to achieve results.

At least three models will be developed or implemented under FUNDESCOLA II:

1. Escola Ativa (Active School) is a good example of one such school design. The modelwas developed under the Second and Third Northeast Basic Education Projects, pilottested in several hundred schools with financing from FUNDESCOLA I, and will move intowide-scale expansion under FUNDESCOLA II. Escola Ativa is a whole-school design forsmall, multi-grade and rural schools.

2. Classes de Aceleraqdo (Accelerated Classes) is a pedagogical approach developed by theMinistry of Education designed to reduce age-grade distortion in grades 1-4. Thisapproach will be expanded and made available by FUNDESCOLA I to selected schoolswithin the microregions.

3. Parametros Curriculares Nacionais (National Curriculum Parameters) are the nationalstandards for elementary education. These standards will be deployed in FUNDESCOLA IIas an operational classroom tool. The standards contain a list of recommended materials(videos, books, magazines, etc) that support teachers in a more effective teaching process.Once the school has completed its school development plan and identified thepedagogical problems teachers are facing, it will be able to choose the specific teachertraining that is needed. FUNDESCOLA II will also pilot the professional developmentprogram linked with these parameters carried out by the Secretary of ElementaryEducation-MEC in the three project regions.

Given the particular characteristics of the project regions, models developed will also takeinto account common problems faced by schools and teachers and will be made available as anoperational tool to address and solve them. Other models with these characteristics may beelaborated during FUNDESCOLA I for implementation under future projects.

COMPONENT 3: PROMOTING COMMUNICATION AND SOCIAL MOBILIZATION

Objective

Both the effective implementation and the longer term sustainability of the FUNDESCOLAprogram will require significant changes in the perceptions, attitudes, and behaviors of thebeneficiaries and stakeholders in the Project's targeted regions. Parents should be able torecognize and demand quality schooling for their children, and to understand the importance oftheir participatory role in the school development process. Teachers will need to accept theirresponsibility in assuring that all children achieve at high levels and will need to collaborate withtheir pupils, parents, other teachers in the school and the school principal to relentlessly pursuethis goal. The principal should be able to gamer support and resources to bring the school up tominimum operational standards and to lead the school staff and community in developing andsuccessfully implementing school development plans and school improvement projects. Theprincipal should also understand his role in modeling the educational values of the school andleading the staff in pursuit of the school's mission. Municipal and state education managers willneed to recognize their obligation to assure that all children in their jurisdictions have an equal

50


educational opportunity and endeavor to attain this objective. They should also make sure thateach of the schools they are responsible for: (i) have adequate resources to pursue and meetminimum operational standards; (ii) are teaching to clearly defined learning standards for allchildren; and (iii) are being held accountable for student results. These managers will also need towork with their central office staff to restructure their organization to focus on schools, and topromote continuous professional development of teachers and principals.

This component will promote a structured process of social mobilization andcommunication directed toward primary school beneficiaries and stakeholders in the North,Northeast and Center-West regions of Brazil. In order to contribute to the sustainableachievement of the Program's results, this process will promote and build consensus around themain principles, strategies and objectives of the FUNDESCOLA Program. The social mobilizationprocess will employ a variety of media, including radio, television, newspapers, and selectedmagazines, incorporating several initiatives already supported by FUNDESCOLA I. In addition, thiscomponent will involve greater articulation with other institutions and foster the development ofleadership networks to replicate and disseminate the main features of the FUNDESCOLA Programdesign. The whole process will be assessed in terms of its contribution to the achievement of theoverall project objectives. This component is divided in two subcomponents:

Subcomponent A: Supporting FUNDESCOLA through Communication and Dissemination

The objective of this subcomponent is to disseminate FUNDESCOLA's principles,objectives, strategies, procedures and results to the Project's principal beneficiaries andstakeholders. These activities will help assure that direct and indirect beneficiaries are informednot only about FUNDESCOLA's design and implementation arrangements, but especially about itsphilosophy of educational change and its strategic design.

The new Operational Communication Plan will describe the materials, audience andcommunication media as well as define the monitoring and evaluation indicators. These will beused to assess the relevance of materials produced in building project ownership. Severalinitiatives supported by FUNDESCOLA I, such as the Boletim Tecnico newsletter, Escola Brasilradio program, FUNDESCOLA World Wide Web site and other existing dissemination programswill be improved, updated and adapted, along with new instruments that will be created inconnection with FUNDESCOLA II 's objectives.

In addition, this subcomponent will coordinate monitoring activities with Subcomponent4(c) (Developing Studies and Research in Education) to update the knowledge of the projectmanagers about the values, perceptions and expectations of the beneficiaries. This ongoingbeneficiary assessment will help assure effective design and implementation of thecommunication strategies. Finally, these studies will help the Project build adequate standards ofcommunication, establish a photographic database, and develop a common language for theProject's social marketing campaigns.

Subcomponent B: Carrying Out Social Mobilization Campaigns

The mobilization of project stakeholders is a complementary, but decidedly morecomplex process than the social communication program presented above as it promotes a morepermanent cultural change in support of improved schools and better educational outcomes. Themain challenge of this subcomponent is to build a vision relevant to all potential projectbeneficiaries. Once this vision is defined, the social mobilization program will be put intooperation, beginning with selection of the main actors and actions, and definition of anassessment strategy to monitor the progress and success of the initiatives.

51

FUNDESCOLA I Annex 2Detailed Project Description

This subcomponent will identify, mobilize and train leadership to create a network ofcommunity liaison/social activists. The project will organize workshops and training activities atthe federal, state and municipal levels to replicate and disseminate the shared visions and goals ofthe FUNDESCOLA program. FUNDESCOLA will work closely with the Microregion Forum toencourage their involvement in the process of social change. Where appropriate, the MicroregionForum and school principals may identify a key communicator to act as a communityliaison/social activist for generating local discussion around education reform.

Workshops will be created and adapted from ongoing FUNDESCOLA I initiatives to trainlocal communicators including radio announcers, journalists and others. Finally, a network oflocal organizations and institutions working in related fields will be identified and trained tocreate a partnership for disseminating the principles, strategies and instruments of the program. Itis therefore expected that some NGOs may help support the implementation of FUNDESCOLAactivities, along with the social and/or economic activities for which they are responsible.

COMPONENT 4: STRENGTHENING NATIONAL EDUCATION INFORMATIONSYSTEMS AND PROGRAMS

Objective

FUNDESCOLA II will support existing and emerging national MEC-sponsored programsdesigned to improve school quality. The objective of this component is to provide timely, relevantinformation for educational planning at the school, municipal, state and national levels.

Three main lines of action will be financed by FUNDESCOLA II: (a) education evaluation(assessment) which includes the National System for Basic Education Evaluation (SAEB), theNational Databank (BNI); and initiatives to integrate national and international best practice ineducational evaluation; (b) the Integrated Education Information System (SIED), the schoolcensus, and activities associated with data collection and analysis of educational statistics; and (c)the development of research and studies in education, including an impact evaluation of theFUNDESCOLA project. The National Institute for Educational Research (INEP), a semi-autonomous institute funded by the Ministry of Education (MEC), represents the principalimplementing agency for this component.

Subcomponent A: Improving Educational Assessment

Financed by the Northeast Basic Education II project as well as under FUNDESCOLA I,SAEB will continue to receive assistance and support from FUNDESCOLA II. SAEB's reports andrecommendations, used by education managers, administrators, researchers and teachers, haveprovided states and municipalities with information to identify and address problems and improveeducational practice. New activities financed under FUNDESCOLA II include the development of:(a) a four-year strategic and operational plan; (b) a comprehensive item bank of tested and scaleditems for all assessment purposes; and (c) SAEB-linked standardized test packages for use bystate and municipal governments. These would include national curriculum-based test bookletsand answer forms, administration manuals and optical scanning guidelines, instructional andadministration video tapes, suggestions for developing and including local modules in the test,and guides for analysis, dissemination, and use of results in teacher training programs.

Subcomponent B: Improving and Disseminating Educational Information

The activities to be financed under this subcomponent fall into four main areas: (a)improving the operation of the existing Integrated Education Information System (SIED); (b)

52


improving the quality of the school census; (c) supporting the implementation of school-basedinformation systems; and (d) improving the integrated dissemination of SIED/SAEB indicators.

The Integrated Education Information System (STED) is an information system thatconnects schools, municipalities, and states with the Ministry of Education (MEC) and enablesthe collection of information to ensure planning and continuous monitoring of the educationsystem. An integral part of MEC, SIED also offers society, administrators, and researchers anaccurate and detailed look at education at the local, state, and national levels. Under FUNDESCOLAII, SIED will be made more reliable, rapid and secure through further development of its software,computer systems and network hardware.

Activities to improve the quality of the school census under FUNDESCOLA II will include:(a) encouraging cross-accountability of stakeholders; (b) establishing routine quality control anderror analysis systems; and (c) defining rules and legal parameters for when and how to auditstate and municipal census results. The project will also support the further development of aschool based information system, which will be tested in a sample of schools in the Project'sthree target regions. Finally, FUNDESCOLA II will support the integrated dissemination ofSIED/SAEB indicators through the development of a standardized Annual Education IndicatorsReport program, Annual School Census reports (for all schools, municipal governments, and stategovernments), and SEED modules for use at the state, regional, municipal and school levels.

Subcomponent C: Developing Studies and Research in Education

This subcomponent will support the continuation of an extremely positive and usefulprogram of research begun under the Northeast Basic Education projects, as well as evaluationstudies for the FUNDESCOLA program itself. These include assessment of implementationprocesses, a 5 to 6 year longitudinal and panel multivariate impact study, and assessment of theProject impact on various groups of beneficiaries, including rural and urban poor.

COMPONENT 5: MANAGEMENT AND INSTITUTIONAL DEVELOPMENT OFEDUCATION SYSTEMS

Objective

This component seeks to raise the quality of management of the institutions that areresponsible for schools so that they can better guide, support, assess and provide effectiveconditions for providing equal access and quality education to the children of the selectedmicroregions of the Northeast, North and Center-West regions. Planning, administration,monitoring, analysis and evaluation capacities of each level of the system will be developed ateach level, from the school to the Secretariat. Institutional strengthening for project coordinationand implementation are also included. The three subcomponents are described as follows:

Subcomponent A: Strengthening State and Municipal Collaboration

The Project will work with State and Municipal education leadership to develop threeprinciples considered essential to the development of primary education in the 19 project states,with special emphasis on the targeted microregions. These principles are: state/municipalintegration in the decisions regarding their network of schools and elements of their educationneeds; transparency in the definition and allocation of financial resources and needs; andcommitment toward the objectives and targets of FUNDESCOLA. The principals are operationalizedvia the meetings of the Microregion Forum, and the production, execution, and evaluation of theMunicipal Action Program, State Action Program, and Microregion Action Program. Under. thissubcomponent, the Project will finance a Program of Support for Municipal Education Secretaries(PRASEM), meetings of the Microregion Forum in each microregion, meetings of the

53


Microregion Forum technical team, and a variety of other seminars, workshops and trainingactivities designed to support these three principles.

Subcomponent B: Institutional Development for Secretariats of Education

Under this subcomponent, with the technical support of the Project, the educationmanagers and technical body of the secretariats will complete a Secretariat Management andBusiness Plan (PGS-Plano de Gestao da Secretaria) in order to rationalize decision-making andexecution of strategic actions. The PGS is founded on the principles of effectiveness, equity, andefficiency.

The project will partner with at least two secretariats of education to develop a package oftools and services. These partner secretariats will commit to implementing the components ofFUNDESCOLA throughout their jurisdictions. This partnering is critical to the success of thissubcomponent. The testing and refinement of tools in real environments is also critical to theirquality and viability. The ultimate objective is the development of a program approach to supporta large number of municipalities or even states in system-wide school improvement. Thisambitious objective can only be initiated in FUNDESCOLA's third project.

Subcomponent C: Implementing Microplanning

The Microplanning model adopted by FUNDESCOLA is a combination of School Mappingand the Geographic Information Systems that support decision-makers on the rationalization ofthe urban school network at the municipal level. This is the most important technical instrumentthat the Project has to promote cooperation between the state and municipal governments on theissues of school location and size, and to improve the equity of school quality.

Under the first FUNDESCOLA project the DGP developed the instruments, system anddigital maps of the capital microregions in the North and Center-West regions. Currently,adjustment and piloting of the program is underway with state and municipal secretariats ofeducation. The next step will be to install the school network microplanning information systemin the secretariats and provide training for technical staff. Once the secretariats' teams master thesystem they will be able to support school construction decisions made by the Forum.FUNDESCOLA II operates on the assumption that all school construction decisions, throughout theimplementation period, will be based upon the school network microplanning informationsystem, including construction activities financed exclusively by states and municipalities. Topromote this approach, Microplanning results comprise an integral part of the Microregion ActionProgram.

Subcomponent D: Project Administration and Pilot Activities

To effectively reach all the beneficiaries at school, municipal and microregion levels,FUNDESCOLA management will rely mainly on federal (DGP) and state (COEP) coordinationunits (see also below). Created by WEC to help manage education projects for the poorest regionsof Brazil, the DGP has played a principal role in the implementation of FUNDESCOLA I and thepreparation of FUNDESCOLA II. Its primary responsibilities include administration of financialresources of the Project, and operating as the World Bank counterpart in the preparation,discussion, and negotiation process.

The DGP will further be responsible for the development and carrying out of pilotactivities in areas of extreme poverty or severe social needs, such as training, school constructionand renovation, all aimed at improving the implementation, increasing the impact, and supportingthe expansion of the FUNDESCOLA Program.

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PROJECTIMPLEMENTA TIONARRANGEMENTS

As with FUNDESCOLA l, FUNDESCOLA II is expected to be implemented over a five yearperiod. A Midterm Evaluation of the FUNDESCOLA program as a whole will take place once 50percent of the loan is disbursed. This is expected to occur on or about March 2001, which wouldbe 18 months into the implementation of FUNDESCOLA II and near the completion ofFUNDESCOLA I. A detailed project Operational Manual is already in use under FUNDESCOLA I andwill be adapted under FUNDESCOLA II. Project management arrangements are described below.

At the federal level, the Central Project Coordination Unit (DGP) within the FederalMinistry of Education has been responsible for the preparation and will be charged with theadministration of FUNDESCOLA II. The DGP has already demonstrated, through its capableperformance of similar duties under FUNDESCOLA I, that it is institutionally and technically readyto: (a) serve as principal project counterpart to the World Bank and key government andinternational agencies; (b) rely on the state-based Project Executive Coordination (COEP) and onmonitors/supervisors especially hired to support the project implementation at the microregionlevel; (c) analyze and approve state, intra-state, and microregion projects and annual work plans;(d) establish or sign agreements with states, municipalities, and other government andinternational agencies; (e) determine, together with the states, the definition of minimumoperational standards; (f) elaborate the annual implementation program based on themicroregion programs; (g) conduct project-related regional, state, and micro-planning studies;(h) analyze and submit to the World Bank the relevant documentation for the acquisition of goodsand services and expenditure receipts; (i) update FUNDESCOLA's Project Operational andImplementation Manual (MOIP); and (j) prepare the progress reports and participate in the mid-term and final review according to World Bank procedures.

At the state level, FUNDESCOLA operates by means of the Project Executive CoordinationUnit (COEP) within each state education secretariat, which: (a) serves as the key administrativeproject unit at the state level; (b) prepares the Annual Work Plan with the participation of themunicipalities in that state and submits this plan to DGP for approval and registration in the SPA;(c) coordinates project execution across municipalities and state school systems; (d) houses theDGP monitors and supervisors; (e) coordinates communication and cooperation among the localgovernment agencies involved in project-related activities; (f) coordinates teacher certificationprograms; (g) procures goods and services according to the guidelines of the World Bank;(h) records and certifies expenditures; (i) prepares progress reports; and (j) monitors andevaluates the outputs and outcomes of FUNDESCOLA in each state. As an executive agency COEPwill be established and its members selected and trained at the initiation of the projectimplementation period (states with participating microregions under FUNDESCOLA I already havetheir COEPs in place).

At the microregion level, FUNDESCOLA has adopted the IBGE-designed concept of themicroregion as the best way to promote collaboration and coordination between municipal andstate education management personnel in each of the municipalities involved, and to maximizeefforts and resources within a microregion. The mayors, or their representatives, in conjunctionwith the state secretary of education and the state president of National Association of MunicipalEducation Managers (UNDIME) are members of the microregion forum which operates as a localplanning instance of the project to: (a) negotiate the priorities within and across the municipal andthe state education systems in the microregion; (b) agree on the consolidation of the variousmunicipal action programs into a single, prioritized microregion action program (PAZ), (c) agreeon common targets for the microregion action program; (d) plan and monitor the implementationof the microregion action program; and (e) and propose the annual implementation program tobe approved by the federal project coordination unit (DGP) and financed by FUNDESCOLA. Themicroregion forum is assisted and advised by a technical group, whose role is to complete therequisite surveys, the preliminary microregion action program, its implementation schedule, and

55


other technical documents. The microregion forums have undergone extensive training by thefederal project coordination unit (DGP) and are well established in each of the project states.

At the municipal level, each municipality already participating in the microregion forum isresponsible for: (a) designing the municipal action program and schedule, and the municipalannual implementation schedule; (b) assisting schools in designing their own school developmentplan and school improvement projects; (c) fostering the operation of school councils andcommunity participation; (d) actively participating in their microregion forums; (e) developinginter-municipal cooperation within the microregion; and (f) monitoring the delivery of goods andservices procured by the state Project Executive Coordination Units (COEP). Finally, guidanceand training for school leadership in the creation of a school development plan and schoolimprovement project will be offered through municipal-based School Development Teams(GDE). These teams will be composed of municipal education professionals who will themselvesbe trained by the federal (DGP) and state (COEP) level coordination units.

PROJECT FINANCING ARRANGEMENTS

FUNDESCOLA I project financial resources both from the loan and federal counterpart willbe administered by FNDE (National Education Development Fund), a semi-autonomous federalinstitution linked to the Ministry of Education. FNDE is responsible for collecting, managing anddisbursing education salary fund revenues, including the federal "share" of this fund.FUNDESCOLA counterpart funds are financed out of this federal share.

Counterpart financing amounts are budgeted annually by the Ministry of Education andcodified in the Projeto de Lei Orcamentaria, approved each year by congress. Once the budget isapproved, FNDE has the authority to execute the funds. FNDE transfers these budgeted resourcesdirectly to schools, municipalities, states, and ministry of education units through convenios(public contracts) agreed between these executing agents (secretariats of education, etc.) andFNDE. As a requisite condition to signing these convenios the executing agent must submit anannual work plan (PTA) for approval. FNDE has delegated legal responsibility for reviewing andapproving all FUNDESCOLA related convenios. This legal responsibility is codified in Portaria-MEC No. 172 de 3/4/98. Procedures for transfer of resources, monitoring and evaluation varybetween each project executor. Further information regarding these financial arrangements can befound in the Project Operations and Implementation Manual (MOIP).

56

FUNDESCOLA 11 Annex 3Project Costs


Table 3.1: Estimated Project Costs

Component Local Foreign Total % TotalBaseCost

1. Raising Schools to Minimum Operational 327.1 8.4 335.5 88%Standards

A. Promoting School Autonomy 145.0 0 145 38%B. Educating and Certifying Teachers 6.0 0 6 2%C. Supplying Basic Furniture 47.6 8.4 56 15%

and EquipmentD. Financing School-Managed Physical 25.0 0 25 7%

Rehabilitation ProjectsE. Implementing the Model School Program 103.5 0 103.5 27%2. Establishing a School 17.0 17 4%

Development ProcessA. Designing and Implementing School 1.6 0 1.6 0.4%

Development Plans (PDE)B. Financing School Improvement Projects 15.0 0 15 4%

(PME)C. Developing, Testing, and Implementing 0.4 0 0.4 0.1%

Pedagogical Models3. Promoting Communication and Social 4.0 0 4 1%

MobilizationA. Supporting FUNDESCOLA through 1.0 0 1 0.3%

Communication and DisseminationB. Carrying Out Social Mobilization Campaigns 3.0 0 3 0.8%4. Strengthening National Education 10.0 0 10 3%

Information Systems and ProgramsA. Improving Educational Assessment 4.0 0 4 1%B. Improving and Disseminating Educational 1.8 0 1.8 0.5%

Information _

C. Developing Studies and Research in 4.2 0 4.2 1%Education

5. Management and Institutional 11.5 2 13.5 4%Development of Education Systems

A. Strengthening State and Municipal 1 0 1 0.3%Collaboration

B. Institutional Development for Secretariats of 1 0 1 0.3%Education

C. Implementing Microplanning 2 0 2 0.5%D. Financing Project Management and Pilot 7.5 2 9.5 2%

Activities6. Bank Administrative Fee 0 2 2 1.0%

Total Base Costs 369.6 12.4 382 100%A. Price Contingencies 20 0 20 5%B. Physical Contingencies

Total Project Costs 389.6 12.4 4021N.B: Foreign Costs Are For Purchase of Computer Equipment

Taxes Included In Project Proposals Submitted to The Project Unit

57

FUNDESCOLA I Annex 4Economic Analysis

Annex 4FUNDESCOLAII

Economic Analysis

EXECUTIVE SUMMARY

Given the project's objective - to improve educational outcomes through improvement inschool quality and an ensuing reduction in repetition - the analysis of the project's impact can becalculated through the calculation of two student flows, with and without FUNDESCOLA II. Eachflow will result from an initial situation and a series of approval rates that will be directly increasedby two of the project's components. The project's five components are not easy to separate, giventhat the system management and mobilization components are expected to strengthen the contextfor better school management and ultimately, higher quality schools, resulting from the two directschool-level interventions. In this analysis, the costs of system-wide improvements were counted,but their benefits were supposed limited exclusively to permitting better PDE implementation byschools.

The direct fiscal negative impact is the further indebtedness of the Federal government andthe cost in counterpart funds. This is not a negligible effect in a country already as far in debt asBrazil. Indirectly, however, there will be a positive fiscal impact as the flow improves and eachchild stays a shorter period in school, making his or her education cheaper. This same reason makesthe project inherently sustainable.

The winners with the FUNDESCOLA II project will be those students in schools that willbecome better as a result of its interventions. State and municipal governments will also win due tosavings in their school systems. There are no losers, except, in a diffuse way, taxpayers and theFederal government that could have spent its resources on other projects.

The project is risky in that, dealing with fallible human institutions and complex politics, itsinterventions may be more or less successful. This analysis shows, however, that even if marginallysuccessful, its interventions will yield significant results.

PART I: PROJECT CONTEXTAND DESCRIPTION

FUNDESCOLA II is the second in the three project FUNDESCOLA Program. An economicanalysis of FUNDESCOLA II must therefore be at once an analysis of the Program thus far and of thevalue added by this second project. This should not be too difficult as both projects apply the sameinstruments, although in two different geographical areas. While it is still too early to analyze theresults of FUNDESCOLA I as only next year (1999) are any measurable results expected, theinvestments made in that project should be considered in this analysis.

Both the main components of FUNDESCOLA II and their underlying logic will be much thesame as those of the first project. Small corrections and changes in emphasis will occur, but thespirit is the same. The analysis methodology will therefore also be analogous and will base itselfupon the fact that high repetition rates have clogged up the flow in such a way that that both perstudent cost and academic achievement depend heavily on approval rates. In 1998, some 18 yearsof enrollment were necessary to produce each primary school graduate instead of the eight that

58

FUNDESCOLA II Annex 4Economic Analysis

would have been had the flow of students been perfect'. This means that the cost of one primaryschool graduate is more than twice that under perfect flow. More dramatic, of course, is that loweducational outcomes themselves, and all the ensuing dire consequences to the future lives ofindividuals, are highly related to high repetition. Therefore, a student flow model will form thebasis for the calculation of the project's internal rates of return.

Of course not everything is identical. There are differences in the structure and emphasis ofFUNDESCOLA I and 11, but the most important change is in the context in which each is executed.The most striking difference to the casual observer is that Brazil is today in a situation of deep fiscalcrisis (see Annex 5). This crisis will have strong effects on both project finances and othereducational funds complementary to the project. The effect of the fiscal crisis will be betterdiscussed in Annex 5, but it is important to keep in mind that FUNDESCOLA II will be implementedin a context of strong fiscal restraint.

Equally important is that FUNDESCOLA II will be implemented with the National EducationDevelopment and Maintenance Fund (FUNDEF) already in effect. This means that the logic ofbasic education financing has already changed with various already observed consequences such asa dramatic increase in the demand for teacher's training courses (magisterio), a battle for studentsbetween state and municipal systems, an increase in enrollment levels across the board, and areduction in resources for other levels of education (such as pre-school) in some systems. Whilethere can be little doubt that the implementation of the FUNDEF has been very positive foreducation in Brazil, it does place new demands on school systems.

One of the functions of FUNDESCOLA is to prepare schools for the FUNDEF and one of theformer' s advantages is that it is being implemented under the context of the latter. That the twofollow the same logic can be seen from at least four points of view:

i. While the FUNDEF attempts to focus on the student (including by making him worth money),the spirit of the FUNDESCOLA is to focus the school system on the school and the school on thestudent. The whole School Development Plan revolves around the student (foco no aluno).

ii. FUNDESCOLA's microregional framework for execution, where all schools are worked withirrespective of the school system they belong to, follows the same logic as the FUNDEFproviding identical per student financing to all schools within each state.

iii. FUNDESCOLA has placed strong emphasis on both human resources and material minimumoperating standards. This is coherent with FUlNDEF, where minimum standards are expectedto follow minimum levels of financing provided by the Fund.

iv. Finally, both make mobilization and accountability a centerpiece of their operational strategy.

The synergy between FUNDEF and FUNDESCOLA is important in that the latter is expected to actas a guide to improving schools under the context of the former. In this economic analysis we willsuppose that FUNDESCOLA's innovations will be adopted by some of the other schools in theparticipating microregions. The percentage of schools adopting these innovations and their averageeffectiveness will be the key variables in this analysis. But before explaining the methodology indetail a brief description of the project is in order.

' This does not mean that the average 8h grade graduate takes 17.81 years to complete school, as enrollmentof children who drop out before finishing is also counted.

59

FUNDESCOLA 11 Annex 4Economic Analysis

The FUNDESCOLA II project is divided into the following areas:

1. Minimum Operational Standards

2. School Development Process (PDE)

3. Social Mobilization and Communication

4. National Education Information System

5. Management and Institutional Development of Education Systems

The last three components, while very important, have effects that are too diffuse to quantify andthus will be considered "lost money" in this analysis (their cost will be counted but no directpositive effects will be attributed to them). The first two components will provide the keyparameters for estimating student flow and thus rates of return - the greater the number of schoolsachieving minimum operational standards, the greater the number undertaking PDEs and the greaterthe number of those undertaking PDEs the larger the increase in approval rates.

The baseline will be a pilot project in the municipality of Rondon6polis in Mato Grosso wherethe FUNDESCOLA School Development Methodology was used with great and measurable success: areduction in repetition of 6% in the first year of implementation and of 20% in the second year.

In addition, three benchmarks for achieving project indicators are as follows:o Proportion of primary school graduate meeting SAEB to increase from 33 to 50%.O Number of primary school graduates to increase by 70%.o Promotion rates to increase by 15%.

The first benchmark, while fundamental to ensure that a better flow does not come at theexpense of lower quality, cannot be modeled given Educational Census data.2 The secondbenchmark is easily modeled and will be included. The third is the fundamental parameter ofinterest that will determine project success or failure. In addition, we will also model an indicatorof poor flow, which is the number of enrollment-years necessary to make one eighth grade graduate,today at 17.813.

PARTII: ANALYSIS METHODOLOGY

As stated before, the methodology to be followed is the same as that used in the economicanalysis of the FUNDESCOLA I Project : the flow of students from grade to grade. Once again therewill be no new school construction so the entire impact of the project should be reflected inapproval, drop-out and repetition rates.4 While the main project components - Minimum OperatingStandards, PDE, and system management - are the same as in the first project, their weights have

2SAEB data could in principle be used to model test scores but would require an educational productionfunction beyond the scope of this analysis.3 This does not mean that children dropping out before 8th grade derive no benefit from their schooling; it ismerely an indicator of good flow.4One improvement will be that the 1997, 1998, and 1998 educational census ask how many students enrolledthis year were not approved last year. This means that real repetition and drop-out rates can be calculatedyear, school by school.

60


changed and new microregions have been added, making it necessary to recalculate the costs andbenefits. This cost-benefit analysis will undertaken in the following manner:

a) A flow model will be estimated for each participating microregion using the educationalCensus;

b) A historical trend will be applied to the flow in order to project the result without FUNDESCOLA;

c) The impact of FUNDESCOLA on the flow will be calculated using Rondon6polis data;

d) The difference between the two flows will be taken;

e) Given this difference, savings in enrollment and increases in academic achievement will becalculated

f) These savings and increases will be converted into monetary flows using per student cost andprivate rates of return to education;

g) The internal rates of return for each flow will be calculated given various time horizons.

Those having read the FUNDESCOLA I economic analysis will recognize the above methodologyas identical to that used in that first project. There will, of course, be some improvements andupdates:

(i) enrollment and approval rates will be estimated using the 1998 Educational Censusundertaken after the implementation of the FUNDEF and thus measuring the incentivesprovided by that Fund's existence;

(ii) private rates of return on education will be estimated using the 1996 PNAD householdsurvey; and

(iii) the FIINDEF will be better projected using a trend on VAT collection and ConstitutionalTransfers.

The accuracy of the rates of return depends on the estimation of various parameters: thosecharacterizing student flow, those characterizing per student cost and those characterizing labormarket returns to education. A total of 15 critical parameters will be estimated making sensitivityanalysis for each one an impossible task. We will thus maintain the two fundamental variablesaffecting approval rates by microregion: the number of schools undertaking PDEs and the averageeffectiveness of each PDE.

PART III: ESTIMATION

Student Flow Model

A complete description of existing educational configurations is very difficult due to thebewildering multitude of all possible combinations of grade level, age-grade lag (or age), andcalendar year. The underlying logic is, however, quite simple. If a given child is in a given gradelevel N in a given year t, then the following diagram describes all possible outcomes:

61


c GradeN+l,yeart+1a Promotion

1-c Drop-outs with grade NGrade N, year t

r Grade N, year t+11-a Retention

1-r Drop-outs with grade N-1

As much of the high drop-out rate observed is actually veiled repetition, only a is directlyobservable using the educational census.5 This is because children who believe they have littlechance of being approved will often leave school before the end of the year, often encouraged byteachers. Various flow models using chain-linked data or auxiliary data have estimated a, c, and r.They disagree to some extent over the exact value of c and r, but all agree that they are relativelyconstant once a has been determined.

We will use those studies whose assumptions on student behavior are the weakest: Barrosand Mendon,a (1996) and Schiefelbein and Heikkinen (1992) (reproduced in Gomes Neto (1992)).The numbers shown below are the rounded averages of Barros and Mendonca' s and Schiefelbeinand Heikkinen's estimates. The last column on the table shows the trend on promotion rates, A a,calculated by Barros and Mendonca and from 1988 to 1993.

Table 4.1 - Estimation of Student Flow Parameters

Grade r c a1st 0.88 0.98 0.00922nd 0.85 0.96 0.00633rd 0.88 0.96 0.00654th 0.88 0.93 0.01125th 0.90 0.96 0.0086th 0.90 0.96 0.0087th 0.90 0.96 0.0088th 0.90 0.96 0.008Source: Barros and Mendonqa (1996) andGomes Neto (1992)

We will suppose that the observed trend will continue into the future. This is bothoptimistic and realistic given the positive changes that have been occurring in education in Brazil.One important shortcoming of our model is that no allowance will be made for demographicchanges - the number of new students entering the system will be supposed constant and equal tothe number that entered first grade in 1998.

Given the above model and coefficients, we need only estimate a and the initial enrollment,both by grade level, for each participating microregion. This information is available in theeducational census.

5 The quality of the edcuational census is far from ideal; while there is no coherent bias, approval andenrollment numbers are measured with high error rates.

62


Per Student Cost

The conversion of student flows into costs or savings in reais (R$) requires an estimate ofmarginal cost. The National Education Development and Maintenance Fund, or FUNDEF, whichhas come into effect nationwide as of January I' 1998, has made this quite simple. The Fundprovides two minima for educational expenses in any given state: the first is 15% of VAT taxcollection and Constitutional Transfers and the second R$ 315 per student per year. In those stateswhere 15% of VAT and transfers amounts to less than R$ 315 per student, the Federal Governmentwill complement the Fund until it reaches that amount.

From the point of view of per student cost, states and municipalities fall into two categories:those whose lower limit to educational expenditure is R$ 315 and those whose lower limit is higher- 15% of revenues. In those systems where students are worth R$ 315, a better flow will translatedirectly into savings for the Federal Government. In those systems where 15% tax collection andConstitutional Transfers are greater than R$ 315 per student, a better flow will not save any moneybut may be interpreted as freeing resources from quantity to better quality of education throughhigher teacher wages or better inputs. We will calculate both income streams and their rates ofreturn.

Tax collection can be estimated using a simple trend on historical series of Value AddedTax (VAT) collection and Constitutional Transfers (CT). The logarithm of VAT and Transfers wasregressed on time from 1991 to 1997. The estimated coefficients were used to project both sourceof revenue into the future. Evidently, this methodology loses its accuracy quite quickly as ValueAdded, Industrial Products, and Income Tax collection6 all depend on a plethora of economic andpolitical conditions, none of which can be foreseen with great accuracy. We cannot, however, thinkof a more accurate method, so we will content ourselves to point out this one's shortcomings. Thecomposition and growth rate of the FUNDEF for each of the states in the project are shown in thetable 4.2.

Some states in the North have been experiencing very high growth rates in VAT collectionand projecting this would lead to absurdly high per capita collection in about five years, so wecapped per student projected values at R$ 1,000.

One remaining issue is whether students in different grade levels have different marginalcosts. Federal Education Council norms do not stipulate any a priori reason for differences in costs:teachers are expected to have similar qualification levels and teaching materials are not expected tobe markedly different. There is however a de facto difference: while much of first to fourthenrollment is in small schools providing only first to fourth education, almost of fifth to eighthenrollment is in larger schools thought to be both of better quality and more expensive to run. Wecannot, without more detailed information on school costs, estimate whether students in differentgrade levels have different marginal costs.7

6The FUNDEF is composed of 15% of two sources: VAT, collected by the states, and 45% of Income andIndustrial Products Taxes, which form the basis of Constitutional Transfers from Federal Government tostates and municipalities.7This information is being compiled by an FNDE survey to monitor the implemenation of the FUJNDEF, butit will be available only at the end of 1999.

63

FUNDESCOLA I1 Annex 4Economic Analysis

Table 4.2 - FUNDEF Composition and VAT and Constitutional Transfer Growth RatesComposition Growth Rates

State VAT CT VAT CT AverageAcre 12% 88% 8.2% 3.8% 4.3%Amazonas 75% 25% 11.1% 3.9% 9.3%Para 38% 62% 3.1% 7.0% 5.5%Rondonia 49% 51% 6.8% 3.8% 5.3%Roraima 16% 84% 6.6% 3.8% 4.3%Amapa 13% 87% 6.7% 3.8% 4.2%Tocantins 21% 79% 5.3% 3.7% 4.1%Maranhao 25% 75% 3.0% 4.2% 3.9%Piaui 31% 69% 7.1% 3.8% 4.8%Ceara 50% 50% 6.3% 3.9% 5.1%Rio Grande do Norte 41% 59% 10.2% 3.8% 6.4%Paraiba 38% 62% 8.1% 3.8% 5.4%Pemambuco 57% 43% 4.4% 3.7% 4.1%Alagoas 36% 64% 4.8% 4.1% 4.4%Sergipe 40% 60% 5.9% 3.9% 4.7%Bahia 55% 45% 3.5% 5.7% 4.5%Goias 70% 30% 3.7% 4.3% 3.9%Mato Grosso 64% 36% 6.8% 7.0% 6.9%Mato Grosso do Sul 64% 36% 1.1% 7.1% 3.3%Brazil 49% 51% 3.7% 5.9% 4.8%Source: Bulletin of the Central Bank of Brazil.

Labor Market Returns

Finally, private rates of return to education can be easily calculated using the standardMincerian wage equation. In this case, we have exceptionally good and up to date data fromBrazil's yearly household surveys, the PNADs (Pesquisa Nacional por Amostragem de Domicilios).In the PNADs since 1992, both income and educational level are well measured with structured andcross-referenced questions.

The standard equation is:

log Y = E fij di + y, Age + y2 Age2 + a

where Y is the hourly wage received in all occupations the week before the survey and di is adummy having value 1 if the individual has completed the i-th grade level of education and 0otherwise so that a person having completed fourth grade will have:

d1=d 2 =d3 =d4 =1 and d5 = d6 ... d 12 = 0-

In other words, the coefficient A shows the marginal log rate of return to the i-th grade level ofeducation. The equation was estimated for those between 16 and 65 years receiving positiveincome during the week before the survey and living in urban areas.

64


The educational census does not provide us with information on enrollment by gender andso there is no point to estimating the equation separately for men and women. This is unfortunate asthe rates of return for men and women are quite different8. The coefficients for all of Brazil, theNorth, the Center-West and the Northeast are all shown below (t-values are in smaller print).

Table 4.3 - Private (log) Rates of Return to Education

Brazil North Northeast Center-WestN 103,331 7,994 26,367 10,967R 2 0.2955 0.2679 0.2368 0.3176

dl 0.1684 0.0532 0.1715 0.12457.13 0.70 4.13 1.93

d2 0.0892 0.0928 0.0845 0.00253.43 1.09 1.75 0.04

d3 0.0619 0.0593 0.0141 0.07303.23 0.93 0.35 1.37

d4 0.1867 0.1082 0.0811 0.107412.91 2.07 2.34 2.55

d5 0.0270 0.0642 0.1472 0.03022.00 1.28 4.40 0.77

d6 0.1202 0.0203 0.1004 0.07206.83 0.33 2.29 1.50

d7 0.0421 0.0571 0.0283 0.08662.18 0.86 0.59 1.63

d8 0.1474 0.1838 0.1091 0.17589.14 3.25 2.69 3.78

Source: 1996 PNAD microdata.

It is interesting to note that the private rates of return are consistently lower in the North andCenter-West than in the Northeast or in Brazil as a whole. It is important to note that both areregions of high immigration and under fast economic transformation.

There is an obvious selection bias because we are observing only those individuals choosingto work and because the choice between home work or leisure and wage work is not independent ofthe wage offered in each sector. Thus, the equation was estimated using a two-stage Heckmancorrection term. This procedure is inefficient but unbiased and given the large sample size, itshould be equivalent to full maximum likelihood estimation.

s The average is the same, but women's rates are more constant while men's vary considerably according tograde level.

65


Table 4.4 - Private (log) Rates of Return to Education with Heckman Correction for Selection Bias

Brazil North Northeast Center-WestN 103,331 7,994 26,367 10,967R2 0.3168 0.2883 0.2605 0.3428

dl 0.1659 0.0586 0.1720 0.09307.13 0.79 4.20 1.47

d2 0.0974 0.0818 0.1095 0.04603.80 0.97 2.30 0.66

d3 0.0655 0.0861 0.0285 0.05633.47 1.38 0.71 1.07

d4 0.1795 0.0932 0.0698 0.105712.60 1.81 2.05 2.56

d5 0.0141 0.0683 0.1436 0.02181.06 1.38 4.36 0.56

d6 0.0973 -0.0031 0.0715 0.06225.61 -0.05 1.65 1.32

d7 0.0255 0.0355 0.0139 0.06181.34 0.54 0.29 1.19

d8 0.1238 0.1589 0.0666 0.15187.80 2.85 1.67 3.32

Source: 1996 PNAD microdata.

The Heckman correction slightly lowers the coefficients to education but the picture ismuch the same. Once again, the North and Center-West have lower rates of return than theNortheast or Brazil as a whole. A slightly aberrant coefficient is the one for six years of schooling inthe North - it is negative, though not significantly so. This may be due to the effects of migrationor other decisions that may be picked up by the Heckman correction term. We will take as ourcoefficients those estimated using the Heckman correction and negative coefficients will be roundedto zero.

PARTIV: INTERNAL RATES OFRETURN

With the model clear and once in possession of the parameters characterizing student flow, perstudent cost, and labor market returns to education, calculation the various income flows and theirrates of return is simple. The flow model will provide two flows of students -with and without theproject - and their difference will provide FUNDESCOLA's impact in terms of education. Each ofthese flows will be translated into three income flows:

i. Savings to the Federal Government resulting from better student flow;

ii. Savings / improvements in quality to all level of government;

iii. Expected additional income to students resulting from higher educational levels.

66


Three scenarios will be calculated based on the results of a pilot program in four schools in themunicipality of Rondon6plis in Mato Grosso. The three are:

Table 4.5 - Scenarios

Scenario Percent of Schools Average Increase inUndertaking PDE Approval

First year Second YearBest At least 75% 3,96% 13,2%Middle At least 50% 3% 10%Worst Only those financed 2.4% 8%

by FUNDESCOLA

Finally we calculated the internal rates of return of the various income flows for severaltime horizons. This was done for both the FUNDESCOLA Program thus far and for the FUNDESCOLAII project.

Table 4.6- Internal Rates of Return FUNDESCOLA Program

Income Flow Best Middle WorstGovernment 15 year 6,90% -0,11%Social 6 years -4,99%Social 10 years 28,06% 12,97%Social 15 years 36,58% 24,55% 8,11%

Table 4.7 - Internal Rates of Return FUNDESCOLA 11 Project

Income Flow Best Middle WorstGovernment 15 year 5,66% -0,82%Social 5 years 8,66%Social 10 years 31,67% 18,21% 2,37%Social 15 years 35,27% 23,36% 9,38%

It is no surprise that even for the worst of scenarios both project and program havereasonable internal rates of return. While some of this is due to the high expected effectiveness ofthe PDE methodology, it is mostly due to the terribly clogged up state of the flow.

There are various possible sources of underestimation of these rates:

O No allowance was made for continued schooling. The fact that individuals finishing eighthgrade may continue and achieve much higher rates of return after secondary and highereducation is not counted.

O The effects of all three management subcomponents, apart from making possible the PDE, areignored. Their cost, however, is included.

O No spillover effects of the PDE outside the microregion are considered.

Finally, there are various shortcomings to this analysis, which may under or over-estimate thetrue rates of return. Among these are:

O That there is no demographic model while birth rates have taken a plunge - and are still falling -during the last 15 years in Brazil.

O The poor prediction of tax collection forming a basis of per student cost.

67


o The lack of information on how the cost is distributed by grade level.

o The poor quality of Educational Census data and thus poor quality of approval, promotion, andrepetition information.

None of them, however, invalidate the basic message: high repetition has created distortedsituation that is both costly to public finances and terrible for student motivation. Even smallimprovements in approval rates will lead to both large savings in useless repetition enrollment andimprovements in educational achievement.

68

FUNDESCOLA II Annex 5Financial Analysis


Financial Analysis

Overview

The 1994 Real Plan achieved price stabilization and brought about many positive changesin the economy and in the lives of ordinary citizens. These changes ranged from the end of theinflation tax to increased productivity in industry. However, monetary stabilization abruptlyeliminated the main mechanism previously used by the public sector, and indeed by much ofBrazilian society, to deal with distributive conflict: inflation. While the private sector responded byadjusting, reorganizing, or simply goihg out of business, the public sector responded by going intodebt. Table 5.1 indicates the projected project cost and financing of the project.

Table 5.1 Project Cost and Financing

1999 2000 2001 2002 TotalProject Financing 160.0 103.5 113.0 23.5 402IBRD 82.5 59.1 48.3 12.1 202Government 77.5 44.4 64.7 13.4 200

(See Annex 6 for greater detail about project cost and financing.)

Furthermore, since the seriousness of the situation was recognized neither by thegovermnent nor by the various groups involved in the distributive conflict - public employees,taxpayers, congressmen - scarce attention was given to how public sector borrowing requirementswere met. Consequently, much of this borrowing was in the form of short term debt, which issensitive to changes in international interest rates. The positive international context at that timemade this easy to do, and the result was that net public sector debt doubled from US$ 150 billion in1993 to US$ 302 billion in 1998. Public sector borrowing needs rose from essentially zero percentof GDP in 1993 to 7.0% in 1998.

Table 5.2 Public Sector Borrowing Requirements

Operational borrowing requirements as a percentage of GDP, both calculated as 12 month flows at end ofperiod (December) prices

1991 1992 1993 1994* 1995 1996 1997 1998**Total Public Sector -1.4% 2.0% -0.2% -0.3% 4.8% 3.9% 4.3% 7.0%

Federal Government and -0.3% 0.7% 0.0% -1.2% 1.6% 1.7% 1.8% 3.6%Central BankState and municipal -1.1% 0.7% -0.2% 0.6% 2.3%. 1.9% 2.2% 2.7%governmentsParastatals 0.1% 0.6% 0.0% 0.3% 0.8% 0.3% 0.3% 0.7%

* 1994 data should be read with care as that year's flows involved two different currencies**August 97 to August 98Deflator: IGP-DI CentradoSource: Bulletin of the Central Bank of Brazil.

69


Table 5.3 Net Public Sector Debt(in US$ millions in December)

1991 1992 1993 1994 1995 1996 1997 1998**Total Public Sector 144 286 150543 150247 184 103 214 558 259189 276467 302356

Federal Govermment and 48 335 49 194 43 896 75 536 93 097 123 641 150 360 167 909Central BankState and municipal 27319. 37419 42175 63388 74 619 89869 103 883 109 047governmentsParastatals 68 632 63 930 64 176 45 179 46 842 45 679 22 224 25 399

Exchange rate CR$-R$fUS$ 1,0690 12,3870 54,3350 0,9715 1,0386 1,1561 1,1626

** August 1998Source: Bulletin of the Central Bank of Brazil.Note: Part of the debt explosion (in US$) is due to internal debt in R$ and an appreciating real exchange rate.

The international financial crisis which began in 1997 and was aggravated by the Russiancrisis of October 1998 brought an abrupt end to the use of internationally financed short term debtto make ends meet and Brazil is now faced with an acute fiscal crisis. Although Brazil suffers fromnone of the structural problems faced by East Asian and Russian economies in their private sectors,particularly the financial sector, the public sector is in need of strong and urgent adjustment.Fortunately, there is now a clear awareness on the part of both government and the various socialgroups involved in the distributive conflict of the gravity of the situation. Nevertheless, the task ofadjusting public finances will not be easily accomplished as none of the internal conflicts for thepublic sector cake have disappeared and none of the groups vying for their piece is willing to bearthe brunt of the adjustment.

Fiscal crisis and social expenditure

Given the above context of fiscal crisis, it is inevitable that spending will be cut across allsectors. Furthermore, the political power of various groups, such as public employees andtaxpayers, has been such that they have been able to pressure Congress to refrain from "saddling"them with what they see as an unfair share of the burden. The increase in the personal income taxproposed in 1997 met so much resistance that it was shelved even before being voted on in theHouse. Moreover, most of the proposed legislation to reduce public employee pensions or increasethe contribution of those still working was defeated in the House. The end result is that lessorganized or less powerful social groups, such as the beneficiaries of public health and educationservices, are unable to defend their piece of the cake and may end up bearing the brunt ofadjustment.

Although the Federal Government has publicly committed itself to preserving from cuts themost critical social sectors, such as education and health, two reasons fundamentally limit itsmargins of maneuver:

(i) The gravity of the crisis, the size of the necessary adjustment, and the political power ofother social groups mean that there may simply be no option to cutting in social sectors. Forexample, the 1999 revised budget proposal contained substantial reductions in real spendingfor education.

70

FUNDESCOLAII Annex 5Financial Analysis

(ii) A large part of social spending is made by heavily indebted' state and municipalgovernments, suffering from Federal pressure to keep spending down but whosecommitment to preserve social spending at the expense of other areas may not be as great asthat of the Federal Government.

The fact that social expenditure will be curtailed means that the old issue of efficiencyresurfaces once again. The efficiency of social spending in general, and education spending inparticular is below government expectations. This makes optimization of spending more criticalthan ever before and presents both a challenge and an opportunity. The challenge is to cut spendingwith as small a loss in quantity and quality of social services as possible; the opportunity is toconcentrate attention on efficiency and thus achieve even better results once the crisis is over andexpenditures regain their previous levels. If efficiency-enhancing programs are implemented duringthe duration of the crisis, then perhaps future expansion of social sector outlays will lead to bettersocial programs than before.

Fiscal crisis and FUNDESCOLA

Much of FUNDESCOLA is designed to enhance the efficiency of educational expenditure.The innovations in educational management such as the School Development Plan, Microplanningof new construction, and Strengthening National Educational Information Systems are expected tohave as one of their main results an increase in the efficiency of the school system. In other words,if FUNDESCOLA succeeds in achieving its aims, the dollar efficiency of other educational outlaysshould be greater. In conclusion, Brazil's fiscal crisis has increased FUNDESCOLA's importance dueto its role in enhancing efficiency of other sources of expenditure.

Also important is that FUNDESCOLA 11 will be implemented with the National EducationDevelopment and Maintenance Fund (FUNDEF) already in effect. The complementarity betweenthe two, discussed in Annex 4, means that FUNDESCOLA should have a special efficiency enhancingrole for the five billion or so reais that the FUNDEF is expected to reserve every year for the statesof the North, Northeast, and Center-West.

The effect of the project on public finances is small. Notwithstanding the fact that it is avery large education project, FUNDESCOLA is too small and spread out over time to have anyrelevant effect on public sector finances in Brazil. The data on Table 5.3 can be used to show thatthe entire FUNDESCOLA program (US$ 1.3 billion comprising all three loans and includingcounterpart funds) amounts to a less than 0.5% of net public debt and less than 0.8% of Federaldebt. Constitutionally mandated Federal educational expenditures are expected to amount to morethan R$ 10 billion, making the 1999 counterpart funds of R$ 99 million amount to less than 1% ofFederal educational expenditures. FUNDESCOLA will be a drop in the public sector bucket.

The opposite, however, is not true. The fiscal crisis will also have an unfortunate impact onFUNDESCOLA itself. Although its counterpart funds come from the Salario-Educa9ao,2 making themprotected from budget cuts, the project's external financing is not so protected and Bank financingof FUNDESCOLA in 1999 was reduced from the original R$ 193 millions to R$ 40 millions3. The

1 Tables 5.2 and 5.3 show that state and municipal governments are responsible for over 36% of net publicdebt and 38% of public sector borrowing requirements.2 The salario-educacao is a 2,5% payroll tax legally mandated to be spent on primary education.3 The Bank disbursement schedule and Brazil's budget items should not be confused. Spending more than thebudgeted R$ 40 million in Bank financing on Bank-financed items presents no budgetary problems as theIBRD disbursement will become credit that can be used as long as the project is being implemented.

71


consequent reduction in FUNDESCOLA's pace of implementation resulted in a cut of counterpartfunds from R$ 193 to R$ 159 millions. While the budget reductions will not compromise theproject's efficiency enhancing objectives, they will reduce its implementation pace and thus itsimpact. In conclusion, although FUNDESCOLA will have a negligible effect on public finances, itshould play an important role in dealing with the present fiscal crisis in the education sector.

72

FUNDESCOLA II Annex 6Procurement, Disbursement, and Financial Management


Procurement, Disbursement and Financial Management Arrangements

ProcurementIl. The procurement methods applicable to the various expenditures categories are summarized inTable A, below.

Procedures2. The Project will be financed with World Bank and Government funds. The DGP will be

responsible for assuring that procurement is carried out in accordance with procedures acceptableto the Bank. Procurement of Civil Works and Goods under the project will be carried out inaccordance with World Bank Guidelines Procurement under IBRD Loans and IDA Credits(January 1995, revised January and August 1996 and September 1997). Recruitment ofconsultants' services (consulting firms or individuals consultants) for technical studies, trainingand audits, will be carried out in accordance with the Bank Guidelines on Selection andEmployment of Consultants by World Bank Borrowers (January 1997, revised September 1997 andJanuary 1999).

3. Civil Works: ICB procedures for the procurement of civil works will not be utilized because schoolconstruction contracts will be numerous, small, and scattered, and no foreign contractors areexpected to be interested in these types of works. NCB procedures will be used for contractsestimated to cost less than US$5 million. Smaller contracts for works, estimated to cost belowUS$350,000, up to an aggregate amount of US$10 million, will be procured using three quotationprocedures acceptable to the Bank.

4. Goods: ICB procedures will be used for all goods grouped into packages by state secretariats ofeducation and other executing agencies into contracts of more than US$350,000 (approximatelyUS$49.5 million, or 12.37% of total project costs). NCB procedures will be used for goodscontracts that cannot be grouped into packages of at least US$ 350,000, up to an aggregate amountof US$10 million. National Shopping procedures in accordance with the provisions of paragraphs3.5 and 3.6 of the Guidelines will be used for goods estimated to cost less than US$100,000equivalent per contract.

5. School Grants: For procurement under this category, contracts of small rehabilitation works,estimated to cost less than US$50,000, will be procured by obtaining quotations from qualifiedcontractors, with community participation, or through other local arrangements acceptable to theBank and included in the MOIP. Contracts for goods to improve school quality, consisting of, interalia, educational materials, school and classroom equipment, school supplies, and materials forphysical maintenance, will be grouped into small packages estimated to cost less than US$15,000,and procured following local shopping procedures acceptable to the Bank and described in theMOIP. This category will also finance the hiring of services for school or educational support,such services to be selected on the basis of the qualifications of the individuals, estimated to costless than US$15,000 per school per year, in accordance with the procedures described in the MOIP.These contracts will be procured at the school level, with a total aggregate cost of US$ 185.0million.

73

FUNDESCOLA II Annex 6Procurement, Disbursement, and Financial Management

Table A: Project Costs by Procurement Arrangements a/

(In US$ million equivalent)Expenditure Category Procurement Method Total Cost

ICB NCB Other N.B1.F (includingcontingencies)

1. Works (except those financed by School Grants) 75.0 28.5 b/ 103.5(26.67) (9.33) (36.0)

2. Goods (except those financed by School Grants)(a) For the Borrowere! 46.5 9.5 56.0

(23.25) (4.75) (28.0)

(b) For participating states & municipalitiesd/ 3.0 3.0(3.0) (3.0)

3. School Grantse/(a) School Improvement 160.0 f 160.0

(70.0) (70.0)

(b) School Rehabilitation 25.0 9' 25.0(12.5) (12.5)

4. Training & Consultants (except by school grants)(a) For the Borrower 4.0 4.0

(2.0) (2.0)

(b) For participating states & municipalities/ 25.6 j/ 25.6(25.6) (25.6)

5. Operational expenses k/ 2.0 2.0(2.0) (2.0)

6. UNDP administrative fee 0.9 0.9(0.0) (0.0)

7. Bank front-end fee 2.03 2.0(2.03) (2.0)

Total 49.5 84.5 247.13 0.9 382(26.25) (31.42) (123.46) (0.0) (181.13)

i Figures in parenthesis indicate Bank financing.b/ Three Quotations.C/ Equipment and furniture mainly for schools and administration (to be acquired by the participating states within North, Northeastand Center-West regions and other executing agencies)."u Equipment and Furniture related to the National Program. This sub-category will be implemented with the technical assistance ofthe United Nations Development Program (UNDP), through a Project Document (PRODOC) to be agreed between suchOrganization and the Borrower, and approved by the Bank. The UNDP's fee will be financed by the Borrower. The Borrower willbe responsible for monitoring and evaluating UNDP's performance, as well assuring UNDP's compliance with Bank's procedures.e/ This category will finance school improvement projects, allotments for schools to meet minimum operational standards, andyearly allotments for schools to maintain minimum operational standards. The maximum allotment would be US$15,000 per schoolfor sub-category 3(a), and US$2,500 per classroom for sub-category 3(b).v'National Shopping.g' Three Quotations."The detailed procurement arrangements are listed in Table Al."The expenditures to be incurred under this sub-category include consulting services for the National Program. The activities willbe implemented with UNDP's support (please refer to footnote "d").i/ The detailed procurement arrangements are listed in Table Al.k/Operational expenses means incremental operational costs related to the management and supervision of the Project, includingmaintenance and supplies, communication services and spare parts for office equipment and vehicles, and audit services for schoolgrant procurement ex-post reviews. The activities in this category will be implemented with UNDP's assistance (please refer tofootnote "d") and will be disbursed on the basis of administrative procedures, plans, and budgets approved by the Bankperiodically.

74

FUNDESCOLA 11 Annex 6Procurement, Disbursement, and Financial Management

6. Consulting Services: Quality and Cost procedures will be used for selection of consultants for allcontracts estimated to cost more than US$200,000. Selection based on Consultants' Qualificationsmay be used for small assignments (less than US$ 100,000). Consultant services including foreignand local ad hoc expertise and contractual services - for which individual qualification andexperience are the paramount requirement for the assignment - will be procured under contractsawarded to individual consultants in accordance with the provisions of Section V of the ConsultantGuidelines. Because of the nature of some of the components, such as Social Mobilization, somecontracts may be awarded on the basis of Single Source Selection, pursuant to Clauses 3.8 through3.1 1 of the Guidelines.

7. Procurement Review - Details of the Bank prior review for ICB and NCB processes, and for theselection of consulting services are shown in Table B. Sample based ex-post review of school-based procurement through independent audits will be the responsibility of the DGP, based onTerms of Reference acceptable to the Bank, and procedures detailed in the MOIP.

Documents

8. The following documents will guide the procurement activities:

- For ICB: World Bank Standard Bidding Documents.- For NCB: Standard bidding documents based on Bank's SBD.- For Consultants: Bank's Standard Request for Proposals, and Standards Forms of Contracts.- Other documents include: Bank's Standard Evaluation Reports (for Goods, Works and ConsultantServices), standard general and specific procurement notices, and the project procurement plan.

Assessment of Agency's Capacity to Implement Procurement

9. An assessment of the agency's capacity in handling procurement issues was carried out, and theoverall risk has been considered as "average". As outlined below, a plan for improvingimplementing agency's performance has already been agreed.

Measures to improve MEC's procurement capacity

10. The Central Project Coordination Unit - DGP has experience in procurement management andBank procurement procedures, and is also willing to correct any deviations regarding theprocurement processes. Procurement specialists have been recruited to provide technical assistanceto the DGP in handling all matters related to works, goods, and services, and will be assisted asneeded by consultants in the preparation of bidding documents and bid evaluations. Training ofMEC procurement staff, DGP staff and State Education Secretariat staff in Bank procurementprocedures and documents will be carried out during the second quarter of 1999. Administrativeprocedures have been established in order to improve documentation flow. Procurement processingwill be carried out according to agreed standard processing times between the DGP and the Bank.

Disbursement

11. The applications for Withdrawal must be expressed in the currency of expenditures with theexception of the requests for payments made out of Special Account, established in US Dollarsequivalent.

12. In the case of direct school transfers, certification of expenditures will be completed immediatelyupon transfer of funds, and disbursements presented on the basis of SOEs. Supervision will be

75


conducted by municipal and state secretaries, COEP, and the Project Coordination Unit1.

13. Each Application for Withdrawal will be numbered consecutively regardless of the procedure to beused.

14. Applications for Withdrawal will be used to request: (i) reimbursement from the Loan Account; (ii)requests for direct payment to third parties; or (iii) replenishment for expenditures paid with fundsfrom the Special Account for amounts equivalent to, or about 20%, of the Authorized Allocation ofthe Special Account.

* The Borrower should submit an Application for Withdrawal together with Statement ofExpenditures (SOE) and/or Summary Sheets (SS). When submitting SS, full supportingdocumentation is required. The application should be expressed in the currency of theexpenditure.

* The Borrower should submit Form 1903 with supporting documentation as follows: invoices,receipts, formal bill of sale, copy of checks, or bank orders.

* The Borrower should submit Form 1903 with SOE and/or SS, the Special AccountReconciliation and bank statement.

Retroactive Financin!

15. Project expenditures made after February 5, 1999, not to exceed US$40 million, will be eligible forretroactive financing from the loan.

Use of Statement of Expenditures (SOEs):

16. SOEs will be used for payments pertaining to:* Contracts of less than US$5,000,000 equivalent for civil works and less than US$750,000 for

goods;* Consultant contracts of less than US$ 100,000 and US$ 50,000 for firms and individuals,

respectively;* All other expenditures will be disbursed on the basis of SOEs;* All expenditures incurred by UNDP will be certified through SOEs and attached receipts.

Annex 6, Table Al: Consultant Selection Arrangements(In US$ million equivalent)

Contract Selection Method Total CostCategory QCBS CQ OTHER (including

Contingencies)A. Firms 19.0 2.0 21.0

(13.9) (1.6) (15.5)

B. Individual 9.5 9.5(9.5) (9.5)

Total 19.0 2.0 9.5 30.5(13.9) (1.6) (9.5) (25.0)

Note: QCBS - Quality and Cost Based Selection

CQ - Selection Based on Consultants Qualification

Figures in parenthesis are the amounts to be financed by the Bank Loan

'The SPA - Planning and Monitoring System will consolidate the physical and financial actions in each school,municipality and state.

76


Annex 6, Table B: Thresholds for Procurement Methods and Prior ReviewExpenditure Contract Value Procurement Contracts Subject to

Category (Threshold) Method Prior ReviewUS$ thousands US$ thousands

1. Works >350 and < 5.000 NCB * First two contracts< 350 Three Quotations None

2. Goods > 350 ICB All**>100 and < 350 NCB First two contracts

< 100 Shopping None

3. Services3.1 Firms >200 QCBS All *** (including technical

evaluation)

>100 and < 200 QCBS All *** (except for technicalevaluation)

<100 CQ Review of TORs only

3.2 Individual > 50 Individual All***< 50 Individual TORs and all agreed reporting

requirements (detailed in MOIP)

4. Miscellaneous < 100 Shopping None

Note: * Civil works contract estimated to cost from US$350,000 to US$750,000 will use NCB Standard Bidding Documents forSmall Contracts; and from US$750,000 to US$5,000,000 will use NCB Standard Bidding Documents for LargeContracts.The standardization of architectural models will facilitate prior review by the Bank.** The standardization of: (a) technical specification for goods; (b) place of delivery; and (c) bidding documents willfacilitate prior review by the Bank.*** The standardization of global TORs and model contract forms will facilitate the prior review by the Bank.

Special Account:

17. The Special Account will be denominated in US Dollars.* Authorized allocation is US$ 40.0 million. The implementation process of the project requires the

simultaneous transfer of financial resources to the schools, which are the final executors of theproject. These resources are associated with the various components. The amount of funds in theSpecial Account will be based upon the value of this transfer, and will be at least 20% of the loan.

* The timeframe for certification of these resources will guarantee the continuity of the subsequenttransfers.

* Initial deposit in a commercial bank of US$ 24.0 million upon effectiveness will increase toUS$40.0 million once disbursement and commitments reach US$50.0 million.

* Direct payment: minimum application amount must be above 20% of Special Account deposit.

77


PMR-Based Disbursement

18. Once the Bank approves the Borrower's financial reporting system for PMR-based disbursements(see paragraph 26, below) , the Borrower may choose to substitute PMR-based disbursement fortraditional and SOE-based disbursement procedures: PMR-based disbursement shall follow thefollowing procedures:* All withdrawals from the Loan Account shall be deposited by the Bank into the Special

Account based upon Table C, below. Each such deposit into the Special Account will bewithdrawn by the Bank from the loan account under one or more of the eligible categories.

* Each application for withdrawal from the Loan Account for deposit into the Special Accountmust be supported by a Project Management Report.

* Upon receipt of each application for withdrawal the Bank shall, on behalf of the Borrower,withdraw from the Loan Account and deposit into the Special Account an amount equal to thelesser of: (a) the amount so requested; and (b) the amount which the Bank has determined,based on the Project Management Report accompanying that application, is required to bedeposited in order to finance eligible expenditures during the six-month period following thedate of that Financial Management Report; and (c) the amount deposited, when added to theamount indicated by the Project Management Report to be remaining in the Special Account,cannot not exceed the amount of $50,000,000.

19. Disbursement categories and percentages financed are shown in Table C below:

Annex 6, Table C: Allocation of Loan ProceedsExpenditure Category Amount in US$ Financing Percentage

million1. Works 36.0 35% of all expenditures

2. Goods(a) For the Borrower 3.0 Up to 100% of all

expenditures, excludingduties and taxes

(b) For participating states & municipalities 28.0 100% of foreign and 50%of local expenditures

3. School Grants 82.5 50% of all expenditures

4. Training and Consultant Services(a) For the Borrower 25.6 Up to 100% of all

expenditures, excludingduties and taxes

(b) For participating states & municipalities 2.0 50% of all expenditures5. Administrative expenses 2.0 100% of all expenditures,

excluding duties and taxes

6. Bank administrative fee 2.03 100%7. Unallocated 20.9

,*6 tal 202.03

78


20. Operational Expenses include incremental operating cost incurred on account of projectimplementation, management and supervision, including office maintenance, office supplies,communication costs, office machinery, vehicle maintenance, vehicle acquisition and spare parts,travel or allowances for Project staff.

Financial Manasiement Assessment

Project Financial Management System

21. The Sistema de Planejamento e Acompanhamento - SPA is DGP's current computerized system formonitoring and generating Statements of Expenditure - SOEs, the basis for the Project to prepareapplication forms to disburse funds and request it to the Bank through STN - Secretary do TesouroNacional. This system has been operating for other Ministry of Education implemented Bankfinanced projects such as the Second and Third Northeast Basic Education Project andFUNDESCOLA I for at least 1 year, and has demonstrated its capacity to maintain adequateexpenditure records and generate reports showing the actual expenditures.

22. The SPA was designed, however, without accounting and procurement modules, and it has a weakfinancial management reporting menu. Moreover, the SPA is not integrated into other subsystemsand, as currently configured, is unable to generate physical/financial management reports.

Organizational Chart - Financial Coordinating Unit

ICoordenaq5o Financeira

Secretaria

Ger6ncia Financeira Gerencia de Licitaq6es Gerencia de Desembolso

Project Management

23. General Project Management (the DGP) managed FUNDESCOLA with the support of a FinancialCoordinating Unit that is responsible for the financial management and procurement relatedmatters for the project. The Financial Coordinating Unit consolidates all financial data generated atthe implementing agencies through the SPA.

Accounting System and Procedures

24. The SPA is not structured on the basis of a "chart of accounts," and consequently, as mentionedabove, does not have an accounting module integrated into the system. The system hasdemonstrated its capacity to maintain adequate expenditure records and generate reports showingthe actual expenditures, which are well documented for expenditure tracking.

Project Financial Management Reporting

25. The format of the financial management reports, which are produced manually, does not currentlyallow the DGP to compare planned versus actual activities. On the other hand, the reports availablefrom the SPA do show the amounts of funding planned, contracted (conveniado), disbursed, andspent (documented) both at the central level and at the level of each of the executing agencies

79


(states and municipalities). These reports are prepared by the financial coordination unit basedupon the information received from the implementing agencies, and consolidated in an excelspreadsheet. SPA will be adjusted to generate financial management reports for the DGP tofollow up on the progress of the project.

Auditing Requirements

26. FUNDESCOLA I as well as the Second and Third Northeast Basic Education Project have beenaudited by the Secretary Federal de Controle - SFC, and the auditors have raised no major issues.According to the proposal of SFC made to the Bank in context of the protocol of understanding,SFC will be the auditor of this project

Eligibility for PMR-Based Disbursements

27. Although the FUNDESCOLA 11 project satisfies the Bank's minimum financial managementrequirements, it is currently unprepared to carry out PMR-Based disbursements. ProjectManagement agreed with the Bank at appraisal that, within one year of Project effectiveness, theplan of action for upgrading the SPA, which was negotiated between the Bank and DGP atappraisal, would be fully implemented and that the Project would then be eligible for PMR-baseddisbursements.

80

FUNDESCOLA II Annex 7Poverty Analysis


Poverty Analysis

Empirical studies have shown that education and poverty are closely linked on multiplelevels in Brazil. Most recently, analysis of the 1996/97 Living Standards Survey (Pesquisa sobrePadroes de Vida or PPV) confirmed that Brazilian households headed by an adult with more than 4years of education are much less likely to be poor than those with less educated heads ofhousehold.' Indeed, one of the strongest predictors of poverty in Brazil is the head of householdlevel of schooling. For example, an econometric analysis using the same data source (the 1996/97PPV) showed that education is negatively correlated with the probability of being poor, even whenother factors such as place of residence, age, access to services, and so forth, are held constant.2 Ina related area of research, the relationship between earnings and education level in Brazil is alsostrongly established?.

Equal educational opportunities for all would go far toward addressing the country'sextreme income inequalities over the medium and long-term. The most recent CAS emphasized theimportance of equalizing educational opportunities as a strategy for reducing regional disparities(June 12, 1997). Despite improvements in the past decade in educational opportunities andoutcomes, the poor continue to lag behind their wealthier peers.

Table 7.1 highlights the regional differences in two important indicators: average studentachievement and promotion rates. Average proficiency in Portuguese for eighth grade students, asmeasured on a single scale from 0 to 375 is only 227 in the Northeast. By contrast, the averagelevel of proficiency in the Southeast, which has the highest average test scores, is 262.

Table 7.1 Promotion Rates and Student Achievement Scores by Region in 1995Region Average promotion Average Proficiency

rates for primary Scores for 8h Gradersstudents in Portuguese

North 58.8 238Northeast 60.7 227Center-West 68.6 252Southeast 74.0 262South 75.7 257

Notes: Promotion rates are regional averages for students in grades I through 8. The average proficiencyscores are based on a possible score of o to 375, with a higher score indicating greater proficiency.

Sources: Data on average Portuguese proficiency of 8th grade students are from MEC, based on SAEBtesting in 1995. Data on promotion rates are from MEC, based on the 1996School Census

'Unpublished Bank analysis completed for the Brazil urban poverty strategy paper (forthcoming).2 Ibid.

3 For recent evidence on the relationship between salaries and education levels, see for example, Ramos andVieira, "A Relagao entre Educa9ao e Salarios no Brasil." 1996; Barros and Mendonca, "A Educa9ao e oProcesso de Determina9ao dos Salarios no Nordeste Brasileiro." 1997; and Hammer and Shalizi, "PublicExpenditures for Poverty Alleviation in Northeast Brazil: Promoting Growth and Improving Services." 1998.

81


There is also ample evidence that poor and better-off children in Brazil have very differenteducational opportunities, regardless of region. The bar chart below (graph 7.1) presents datagleaned from the 1996/97 Brazil Living Standards Survey (PPV). Poorer children age 7 to 14 areless likely to attend primary school than others, and are much less likely to attend private school.The gaps between the educational opportunities for children in the poorest 20 percent of thepopulation and those in the richer groups is clear. The same pattern holds within regions: childrenin the bottom per capita consumption quintiles are more likely to be out of school and less likely toattend private school.

Graph 7.1. Primary School Attendance by Consumption Group

Primary school attendance, 7 to 14 year olds

30%

70%

60%

Per capita household consumnption quintlie

S,ource: 1996/97 Living Standards Survey (PPv); calculations made by P. Lanjouw for theUrban Poverty Strategy report. The data only cover the NE and SE regions.

education financing changes initiated in 1996 should help equalize opportunities byguaranteeing a national minimum level of spending for all public primary students (R$3 15).However, it is extremely important that disadvantaged school systems have the skills to makeefficient use of their increased revenues; otherwise the reallocation may have little impact on theeducational opportunities available to poor children.

IMPROVING EDUCATIONAL OPPORTUNITIES FOR THE POORTHROUGH FUNDESCOLA

Given the strong link between poverty and education, and the observed educationaldisadvantages faced by poor children, it is critical to ensure that World Bank-supported educationfprojects in Brazil aim to reduce disparities in educational opportunities for the poor versus the rich.To help reduce poverty, an education project has to: a) produce results, that is furnish benefits byimproving the quality or quantity of schooling; and b) ensure that the poor benefit from theseimprovements. The appropriate use of targeting mechanisms is a means of ensuring thatFUNDESCOLA will achieve its poverty reduction goals. However, it is important to remember thatthe goal is not to achieve precision in targeting by excluding all the non-poor. Rather it is to reduce

82

FUNDESCOLA II Annex 7Povertry Analysis

inequality in educational opportunities to the maximum extent given the project's resources. Thisdistinction matters, because there is usually a tradeoff between more precise levels of targeting andmonetary, social and/or political costs. The FUNDESCOLA program makes appropriate use oftargeting strategies to ensure it will reduce inequalities in educational attainment between the poorand the better-off.

Broad Targeting through Choice of Intervention

FUNDESCOLA focuses on public primary schooling rather than secondary or higher leveleducation, making it more likely to benefit poorer Brazilians. As Graph 7.2 shows, only 23 percentof public primary school students belong to the richest 40 percent of the population. Two factorsexplain the over-representation of poorer Brazilians in the public primary schools: thedemographics of poverty and the tendency for middle-class and better-off parents to send theirchildren to private school. As is true in many countries, a disproportionately high share of the poorin Brazil are children. Moreover, the widespread perception that the public primary systemgenerally provides a low quality education leads many parents to send their children to privateschool as soon as they are financially able (see graph 7.1). At present, sector investments insecondary and university education are substantially less targeted to the poor than investments inprimary education, because the poor make up a much smaller percentage of the student populationat these levels. Indeed, improving the quality of primary education available to the poor is aprerequisite for increasing their access to higher levels of schooling.

Share of public school students belonging to each consumption group, by level of schooling

800%

75.7%

700%

00%

10 0o % ------

0.0%1 2 3 4 S

P* rapit. hor--h- -- pdu qeiu6i

Graph 7.2 Distribution ot Public School Students, Brazil (NE and SE Regions)Source: 1996/97 Living Standards Strvey (PPV); calculations made by P. Lanjouwfor the Urban Poverty Strategy report. The data only cover the NE and SE regions.

The distribution of public primary school students is also biased towards the relatively poorwithin each region. Graph 7.3 shows, for example, how within metropolitan regions, the majority ofpublic primary students come from the lower income groups.

83


Graph 7.3 Distribution of Public Primary Students Relative to theShare of public primary students belonging to each consumption group

(regional quintiles)

45.0%

40.0%

35.0%

30.0%

\ i " F~~~~~~~~~~~~~~-ontaieza MR25.0% -*-Recife MR

-5.-- SaladorMR

20.0% ---- Belo Horizonte MR-\ Rio MR-4-S-ao Paulo MR

15.0% -Nomerortollt.n urban NE--- Nonmetropelitan urban S_E

10.0%

5.0%

0.0%2 3 4 5

Per capita household consumption quintile

Regional Consumption DistributionSource: 1996/97 Living Standards Survey (PPV); calculations made byP. Lanjouw for the World Bank's Urban Poverty Strategy report. The data onlycover the NE and SE regions.

Geographic Targeting and FUNDESCOLA

FUNDESCOLA uses broad geographic targeting in that it operates only in the three poorestregions of Brazil: the North, Northeast and Center-West. As discussed above, both educationalinputs and schooling outcomes are much lower in the project's targeted states than elsewhere inBrazil. To the extent that FUNDESCOLA raises educational attainment in these regions, it will nodoubt reduce inequalities of opportunity between rich and poor in Brazil.

Three activities under FUNDESCOLA II-promoting school autonomy; PROFORMAQAO;and publicizing the program, its principles and results-serve all municipalities, and will thusbenefit 100% of the enrolled public primary students in the three regions (around 17.5 millionchildren). The remainder of project activities focus on the nineteen capital microregions in theNorth, Center-West and Northeast, and eight additional microregions in the North and Center-West.4 Box I describes the microregion concept used in the FUNDESCOLA program. In addition, weexpect the training and experience gained by the state secretariats of education under FUNDESCOLAto have a positive impact on schools in municipalities outside the project's microregions.

Some communities outside of the targeted microregions are particularly under-served andmarginalized. Under FUNDESCOLA II a portion of project funds have been set aside to finance theconstruction of 25 schools outside the targeted microregions, to benefit indigenous and/or verypoor children who lack access to school places of adequate quality. The criteria for selecting thecommunities to benefit from new school construction will be defined in the project's operationalmanual prior to loan effectiveness, and will probably include the percentage of indigenous and/or

' This coverage represents, respectively, 25%, 45% and 47% of the children enrolled in public primaryschools in the Northeast, North and Center-West.

84

FUNDESCOLA 11 Annex 7Poverty Analysis

manual prior to loan effectiveness, and will probably include the percentage of indigenous and/orpoor people in the local population.

Box 7.1 The Mieroregion Model

FUNDESCOLA has chosen the IBGE microregion as its key level of project execution. Theproject's designers, through collaboration with UNDIME and in consultation withstakeholders, organized the project around the iMicroregion' concept, using existingdivisions established by the Brazilian Census Bureau (IBGE). These microregions arewithin state lines, respect municipal divisions and group together a number ofmunicipalities, usually around a leading municipality such as the capital or other city. TheIBGE nicroregions were selected as a means of grouping municipalities for projectimplemerntation because they are transparent, include both political-adtninistrative andsoclo-economic divisions, and facilitate data collection: 1BGE, which conducts the keyhousehold-level surveys and population censuses for Brazil, uses geographic divisionsthat are compatible with the microregion concept.

The microregion model permits a more rational and effective managerial option than thetraditional dispersion of resources among the individual municipalities or theconcentration of resources to state governments. Intervention in a microregion covers allof the municipalities in the microregion. The microregion does not constitute anadditional administrative division, but provides a basis for planning, negotiation, anddialogue among the municipal governments and the state govemment.

Microregions and Project Phasing

The FUNDESCOLA program focuses first on microregions with characteristics that increaseits chances for improving the quality of schooling. Following successful implementation in thecapital microregions, the program expands into more disadvantaged areas. FUNDESCOLA I financedPhase I of the FUNDESCOLA program for the 10 capital city microregions in the North and CenterWest states. These included the microregions surrounding the cities of Belem, Boa Vista, CampoGrande, Cuiaba, Goiania, Macapa, Manaus, Palmas, Porto Velho and Rio Branco. The decision tobegin with the state capitals hinged on a number of operational and equity criteria, including: 1) thedesire to attend to areas of high student concentration within each state, 2) the desire to use themost effective means of initiating dialogue between the state and municipal systems, for replicationwithin the interior in subsequent projects, and 3) the need to test the Program's instruments andoperations within an environment that could be more easily monitored. Initial implementationwithin each state capital allowed for training of the state secretariat staff and technicians to workdirectly with municipalities in their close proximity, and secondly, initiate cooperation among thestate and municipal secretariats for future project experience. The capital microregions also tend tohave larger absolute numbers of poor than any other single microregion in their state, because oftheir high share of state population.

Project activities are sequenced carefully to maximize impact. Each microregionparticipates in FUNDESCOLA in two phases. At the school level, Phase I focuses on socialmobilization, institutional development (particularly the school development process) and activitiesto help raise schools up to minimum standards under Components 1 and 2. Phase I also focuses onmanagement training for managers and technical staff in state and municipal secretariats ofeducation to ensure that they have the skills needed to establish a school-based developmentprocess and carry out programs to increase school access. School construction and school project

85

FUNDESCOLAII Annex 7Poverty Analysis

financing are not addressed in any significant way during this phase. Phase II finances schoolrehabilitation and improvement projects developed by the schools in Phase I through the SchoolDevelopment Planning process, and provides follow-up support for other components.

FUNDESCOLA II will finance Phase II for the municipal and state schools supported underFUNDESCOLA I. It will also expand the program into additional microregions within the North,Center-West and Northeast. Table 7.2 lists the microregions targeted under FUNDESCOLA II. In theNortheast, the project focuses on the capital microregions of the nine states. In the North andCenter West, those microregions whose leading municipality is larger (in terms of population) than50,000 were selected to enter into the project under FUNDESCOLA II. For those microregions whichbordered on entering (within a 5% margin) a secondary criteria using the percentage of poorfamilies, was used. If the percentage of poor families was greater than or equal to that of the lastmicroregion to enter the project, then the microregion entered. The states of Amapa and Roraimahad no other microregions meeting these criteria; therefore, FUNDESCOLA II will not expandcoverage beyond the capital microregions.

Table 7.2. Targeted Microregions in FUNDESCOLA II

$tate Al Phase U P i_____ ____ _____ _ (F NDESCOLA i ~ _ _ _ _ _ _ _ _ _

North RegionAcre Rio Branco Cruzeiro do SulAmnazonas Manaus ParintinsAmapa MacapaPara Belem MarabaRond6nia Porto Velho Ji-ParanaRoraima Boa VistaTocantins Porto Nacional AraguainaCenter-West RegionGoias Goiania Entorno BSBMato Grosso Cuiaba Rondon6polisMato Grosso do Sul Campo Grande DouradosNortheast RegionAlagoas Macei6Bahia SalvadorCeara FortalezaMaranhao Sao LuisPemambuco RecifeParaiba Joao PessoaPiaui TeresinaRio Grande do Norte NatalSergipe Aracaju

The third Project will finance Phase II for the second group of microregions, and Phases Iand II of another set of 25-40 microregions. In the Northeast, those microregions whose leadingmunicipality is larger than 100,000 inhabitants will enter into the project. As in FUNDESCOLA II, forthose microregions which border on entering (within a 5% margin) a secondary criteria using thepercentage of poor families, will be used. If the percentage of poor families is greater than or equalto that of the last microregion to enter the project, then the microregion will enter.

86


Characteristics of the Targeted Microregions

Table 7.3 shows the incidence of poverty, size of the poor population and the share of the

state's poor found in each of FUNDESCOLA II's targeted microregions, based on the 1996 population

census and poverty estimates calculated from the 1991 census. It also presents an indicator of

education system efficiency, the grade repetition rate for grades one through eight.

Table 7.3. Poverty and Education Indicators in the Targeted MicroregionsState Microregion Poverty Number of Share of Grade

headcount poor in microregion repetition rateindex microregion poor in the (grades 1-8)

state poorNorth All 58.6 6,614,920 n.a. 18.70

Acre Rio Branco 47.1 130,333 45.0 14.37Cruzeiro do Sul 76.2 66,726 23.0 19.96

Amazonas Manaus 35.1 452,156 36.1 15.86Parintins 72.4 125,436 10.0 12.10

Amnapa Macapa 42.8 132,543 75.4 21.70Para Beldm 40.1 651,439 19.1 19.70

Maraba 65.7 124,072 3.6 17.87Rondonia Porto Velho 37.2 130,873 19.3 13.69

Ji-Parana 60.0 167,115 24.6 13.33Roraima Boa Vista 31.3 58,943 60.6 16.33Tocantins Porto Nacional 58.7 96,915 13.9 11.24

Araguaina 61.0 128,332 18.5 11.45Center-West All 39.3 4,126,728 n.a. 14.80Goias Goiania 27.9 417,974 22.0 13.71

Entomo BSB 46.2 298,192 15.7 15.47Mato Grosso CuiabA 35.2 234,984 23.7 16.27

Rondon6polis 42.3 89,030 9.0 16.00Mato Grosso Campo Grande 27.7 180,514 21.9 12.63do Sul Dourados 45.6 220,182 26.7 9.03Northeast All 71.7 32,187,366 n.a. 17.10Alagoas Macei6 50.4 446,204 23.5 18.24Bahia Salvador 43.8 1,187,662 13.2 14.68Ceara Fortaleza 53.7 1,386,974 28.0 11.53Maranhao Sao Luis 52.5 502,644 12.2 13.07Pemambuco Recife 47.3 1,314,709 27.3 17.46Parai'ba Joao Pessoa 52.0 413,351 17.0 15.67Piaui Teresina 62.5 507,860 24.3 27.32Rio Grande Natal 41.7 317,008 18.5 18.79do NorteSergipe Aracaju 47.7 130,333 26.9 17.29Southeast All 29.7 19,899,219 n.a. 10.20South All 36.9 8,676,569 n.a. 14.90Brazil All 45.5 71,504802 n.a. 14.10Source: The poverty estimates (headcount ratios) for the microregions are taken from the Atlas do DesenvolvimentoHumano no Brasil, a UNDP/IPEAMBGElFunda,cao Joao Pinheiro undertaking. The data are from the 1991 census; this isthe only data that allow microregionar level calculations of poverty incidence for the entire country. The populationfigures are from the 1996 mini-census (data from IBGE website), which were applied to the UNDP, et al. poverty rates toestimate the number of poor. The microregion repetition rates are taken from the MEC 1998 School Census for 1997;microregion rates are averages of the municipal rates; regional and all Brazil repetition rates are for 1996.

87

FUNDESCOLAII Annex 7Poverty Analysis

The capital city microregions, due to a process of rapid urbanization, possess the highestconcentration of population in each state. This is especially true in the North and Center WestRegions; few medium to large cities exist outside of the capital. In the case of five states, thepopulation of the capital city is larger than the remainder of the state. The capital city microregionsalso contain a substantial share of each state's poor (from 13 to 75 percent, depending on the state).

The targeted microregions contain roughly 34.4, 34.9 and 23.3 percent of the total numberof poor in the North, Center-West and Northeast regions, respectively. FUNDESCOLA II achievesgreater coverage of the poor in the North and Center-West, because these regions are further alongin the process, having participated in FUNDESCOLA I. Most states in these two regions will have twomicroregions participating in FUNDESCOLA II. The Northeast can expect to have higher coverageunder FUNDESCOLA III, when the program expands beyond the region's capital microregions. Themicroregions differ quite a bit in terms of their poverty and repetition rates. In general, theFUNDESCOLA microregions in the North and Northeast tend to have worse poverty and educationindicators than the South and Southeast regions. The Center-West microregions present a differentpicture, as they tend to have indicators more similar to those found in the South and Southeast.

The microregions themselves also contain a lot of diversity: The "poorest" municipalitywithin a "rich" microregion is sometimes just as poor or poorer than the poorest municipality in a"poor" microregion. Similarly, a rich municipality often contains pockets of poverty. In short,geographic targeting even at the municipal level is generally an inefficient way of targeting thepoor. For that reason, within the microregions, FUNDESCOLA targets more resources to the mostdisadvantaged schools (which normally serve the poorer children in a microregion). This occursthrough Component I, in which schools are raised to minimum operational standards. The neediestschools in the microregion receive the most resources, as they require additional inputs close thegap between their current conditions and the minimum operational standard. Uncertified teacherstend to be concentrated in schools serving poorer students; hence, project resources dedicated toeducating and certifying teachers will tend to benefit poorer students more than the better-off.School rehabilitation projects benefit schools with more than 20 students in need of majorrenovations; again, these tend to serve economically disadvantaged students. Many public primaryschools in the three regions have fewer than 20 students. On the other hand, such schools accountfor only a small portion of total enrolments. For example, only 6.6 percent of primary students inthe Northeast attend schools with fewer than 30 students. The smallest schools may include someof the poorer students in the microregion, since they tend to be located in more rural areas.Unfortunately, it is not cost-efficient to include such tiny schools in this component. Similarly,FUNDESCOLA funds the supply of basic furniture and equipment needed to bring schools up tominimum operational standards; again cost-efficiency concerns dictated that these resources focuson schools containing more than 100 students.

It is anticipated that FUNDESCOLA II will benefit millions of poor children. That said, someof the poorest (particularly rural) schools in the North, Northeast and Center-West regions will beexcluded from the majority of the program benefits. This reflects a considered choice. Since projectfeasibility, impact and (especially) sustainability require that municipal secretariats of educationacquire the skills and tools to support school-based development, the Project needs to focus itsresources and training on a limited number of municipalities in a concentrated area to increaseeducational outcomes, build critical mass, assure deeper penetration of the reforms in schools andthe secretariats of education, and provide the conditions for greater sustainability. The need toavoid scattering FUNDESCOLA resources has only increased in light of the current fiscal crisis: thefirst-year budget for FUNDESCOLA II has been reduced from R$386 to R$199 million.

88


MEASURING THE POVERTY IMPACT OF FUNDESCOLA

Given the critical role of education in poverty alleviation, it is important that educationprojects financed by the World Bank attempt to measure the extent to which the project benefits thepoor relative to other groups. This is perhaps particularly true in Brazil, where the level ofinequality, in terms of both income levels and children's access to a quality education, isexceptionally high. Poverty impact, per se, is unlikely to be observable during the implementationperiod of FUNDESCOLA I and II. The impact on household incomes and the incidence of povertyshould only be observable once primary students benefiting from the FUNDESCOLA program havepassed through the education system and entered the workforce. If prior research is any guide, thehigher levels of educational attainment supported by the project should lead to greater earnings forthe beneficiary students in adulthood.

However, we don't want to wait until the project is over to measure the extent to whichFUNDESCOLA is benefiting the poor. Ideally, poverty impact monitoring will provide informationwithin a timeframe that will allow for any necessary adjustments in program strategy. One usefulapproach is to monitor the distributional aspects of the project. To what extent are poor childrenbenefiting from FUNDESCOLA, and how are program benefits distributed among the various incomegroups? Under FUNDESCOLA, the key and leading indicators to be monitored-the proportion offourth grade and eighth grade students meeting acceptable learning standards in Portuguese, andthe promotion rates-will be measured separately for students from different socio-economicgroups. This will be accomplished by "piggybacking" onto the existing efforts to measure schoolachievement scores through the SAEB.

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Social and Beneficiary Assessment

EDUCATIONAND SOCL4L DEVELOPMENT

The relationship between higher levels of education and improved socioeconomic statusis firmly established in the economic literature through a wealth of empirical studies worldwide.Brazil is no exception (see Annex 7 for a further discussion of the Brazil-specific evidence onlinkages between poverty and educational status). There is also ample Brazil-specific evidencethat higher education levels of parents are associated with better health and education outcomesfor children, even holding socioeconomic level constant. For example, the 1996 NationalDemographic and Health Survey (Pesquisa Nacionais sobre Demografia e Saude) found that theprevalence of growth retardation was much higher among children of mothers with lower levelsof schooling, even after the education level of the father (a proxy for socioeconomic status) wasaccounted for.' Parental education level also influences the demand for schooling.2

BENEFICMAR YPOPULA TION

The principal beneficiaries of the project will be primary students in the selectedmicroregions within the Northeast, North and Center-West regions of Brazil. This groupcomprises approximately 50 percent of children enrolled in school, between the ages of 7 and 14.Though the project does not directly address the problem of children who have already droppedout of school, the estimated number of beneficiaries reflects the assumption that improvementswithin schools under the project will lead to a lower dropout rate. While the project also does notspecifically target benefits to poor children, its geographic focus, concentration of inputs toworse-off schools, and emphasis on addressing many of the systemic causes of school failureshould disproportionately benefit poor children (who are at much higher risk of school failure interms of both low achievement and dropout, and are more likely to attend schools in poorcondition). Please see Annex 7 for additional poverty targeting information.

Major stakeholders under the project include parents, teachers, principals, and, perhapsmost importantly, municipal and state education secretariat staff and political leaders whosepolicies, interests, and resource decisions directly affect the schools.

STUDIES ON THE ORIGINS OF SCHOOL FAILURE

There is a rich and growing body of literature and data on education in Brazil. One of themost recent contributions to this literature was a series of studies on the origins of primary schoolfailure. These studies formed the basis of the sector study "Brazil: A Call to Action," which wasjointly sponsored by the World Bank, lUNICEF, and the Brazilian Government. Developed anddiscussed with the participation of a wide array of actors in the educational arena, "A Call toAction" identified four principal causes of school failure:

' Monteiro, D'Aquino Benicio and Marins de Freitas, "Melhoria em Indicadores de Saude Associados aPobreza no Brasil dos Anos 90: Descricao, causas e impacto sobre desigualdades regionais." October 1997.2 Recent evidence on parental education as a determinant of school enrolment can be found in Hammer andShalizi, "Public Expenditures for Poverty Alleviation in Northeast Brazil: Promoting Growth andImproving Services." 1998.

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* Educational systems are not organized to promote school efficiency;* The school does not make student learning its main priority;* Schools are out of touch with their communities; and* Programs for staff development are ineffective and inconsistent.

While many of the background studies relied on quantitative data, several studies conductedin the Northeast relied on qualitative information, or a combination of qualitative and quantitativetechniques, in an attempt to better understand how potential beneficiaries and stakeholdersunderstand their own situation and the possibilities for change. Semi-structured "beneficiaryassessment" type interviews were held with students (both dropouts and currently enrolled),parents, teachers, municipal authorities, and community members, regarding their perceptionsabout school, learning, and the role of education. A study of teacher practices through directclassroom observation was also conducted in 140 first grade classrooms in the states of Bahia andCeara.

The regional focus and small samples of the beneficiary studies suggest caution ingeneralizing their findings. Coupled with quantitative data and information from earlier studies,however, they do offer important insights into the perceptual and behavioral context that anyeducation project will be operating in. Several of the main findings of these studies are discussedbelow.

STAKEHOLDER PERSPECTIVES

Both children and parents accord high theoretical value to education.

The role of education as a means of social advancement is recognized by both parentsand children. Poor, uneducated parents clearly-and accurately-associate their economic andsocial status with lack of schooling, and for the most part have higher expectations regardingschooling for their children than they themselves achieved. Children (both those in school anddropouts) express a strong connection between higher levels of education and better employmentopportunities. Even dropouts recognize that they will not be able to obtain many professionalgoals without further schooling, though they are less clear about how that will happen - whetheror when they will go back, and if they have any chance of succeeding if they do. Few dropoutsinterviewed said they have no intention of ever continuing with their education.3

Recent household survey data for Northeast and Southeast Brazil indirectly confirm thehigh value that children, even dropouts and other non-attendees, place on educational attainment.According to the 1996 Living Standards Survey (Pesquisa sobre Padroes de Vida), less than onepercent of children (7 to 14 year olds) and youths (15 to 17 year olds) not attending schoolbelieve that they have already attained the desired level of schooling.4

There is a gap between perceptions of school as ideal and as experienced.

Despite the theoretical value given to education, students and parents tend to be muchmore critical of schooling in practice. Unsurprisingly, school dropouts tend to be more critical of

3 See: Portela e Bastos: "Educacao, Escola e Comunidade". 1997; Gurgel: "Ditos Sobre Sucesso Escolar,"1998; and Gurgel: "Ditos Sobre Evas§o Escolar," 1997.4 Unpublished Bank analysis completed for the Brazil urban poverty strategy paper (forthcoming).

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school than students who are currently in school or are considered successful. Even successfulstudents cite poor physical conditions of schools, insufficient preparation of teachers, lack ofinterest in/relevance of curricular content, and lack of discipline. Many students work and studyat the same time, leading to a certain ambivalence regarding the role of formal schooling inpreparation for work or life in the "real world" which stands at odds with the expressedconnection between getting an education and getting a good job.

Suggestions for improving school conditions tended to focus on improvements inphysical environment, better qualified teachers, and more discipline. Importantly, even amongthose parents that felt that schools were better than in the past, most felt there was still room forimprovement, though many felt that further improvement would not be possible without somesort of government initiative or assistance. While some parents referred to the government alone(in some cases expressing their own lack of power to act), others suggestedgovemment/community partnership as the appropriate means for improving school conditions.5

There is a gap between schools and surrounding communities.

In general, parents have only limited knowledge of what takes place in school - in partdue to their own limited experience with schooling and in part because of limited schoolinvolvement with community and parents. School interaction with parents tends to becircumscribed: occasional meetings, messages sent home, help with fundraising and events.School expectations of parents, however, particularly in regard to supervision of homework,capacity to read messages sent home, and ability to take time off from work during school hoursfor meetings, often exceed the possibilities of low-income parents. For students, the culture andcontent of formal schooling represents an enormous departure from day-to-day experience: forsome liberating, but for many, alienating.6

Teachers and principals harbor important misconceptions about their role.

In particular, neither seem to evaluate their own performance in terns of student learning.Quantitative data released as part of a 1990 SAEB study of student achievement found that amajority of school principals put student learning in fourth place in order of importance, behind:(1) the relationship between school teachers and other employees; (2) administrativeperformance; (3) teacher performance. The items considered least important were: (1) droppingout; (2) repeating; and (3) passing to the next grade.

In discussions with teachers done as part of classroom observation studies, teachers indescribing their classes rarely made any references to students or student learning. Teachers alsooverwhelmingly used a teacher-centered approach to material presented in the classroom. In onestriking finding, when teachers noted that students did not understand a particular point, 38percent tried to explain it in another way, 36 percent explained it again in the same way, and 26percent did nothing at all. To what degree the latter finding is related to teachers' own lack ofmastery of content and what is related to teachers' assumptions that their job is to presentmaterial, not ensure that children learn it, is difficult to say. Another important finding from theclassroom observation studies is that many teachers expect children to enter first grade alreadyable to read and write, and hence spend little time or energy on basic literacy.7

5 Ibid.6 See: Portela e Bastos: "Educacao, Escola e Comunidade". 1997.7 See: Portela e Bastos: "O Des(conhecido) Universo da Sala de Aula," 1998; and Portela, Bastos, Viera,Maia and Lopes de Matos: "Conhecendo o Universo da Sala de Aula," 1998.

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Repetition is another area of misconception. Repetition is sometimes presented in apositive light, as a "solution" to the problem of children not mastering sufficient material to go onto the next grade. In fact, in most of Brazil repetition appears to have the opposite effect.8 Ananalysis of 1985 household survey data concluded that repetition appears to have a stigmatizingeffect: first grade repeaters were more likely to repeat again than those entering school for thefirst time.9 Analysis of test scores of first graders participating in the classroom observationstudies also found that repetition correlated with lower achievement levels.'° Thus repetitionappears to be neither an efficient nor effective means of ensuring that children learn.

Teachers, children, and parents all blame school failure on those who failed.

There is a strikingly uniform view among teachers, parents, and children that schoolfailure is the result of a lack of individual effort, interest, or ability. Reference to other factorsinfluencing student achievement and persistence in school, including poor teaching, competingstudent responsibilities (to bring in income or help out at home, for example), the physical schoolenvironment, and lack of relevance of content are cited often by dropouts in discussing theirdecision to drop out of school, but rarely by teachers, parents or those students who remain inschool. Rather, those who are unable to learn or decide to dropout tend to be classified by parents,teachers, and colleagues as "lazy", "stupid" or "uninterested in learning," personalizing what isclearly (given the numbers) a systemic failure."

To a large extent this view is also shared by those who fail at school. About half of thedropouts interviewed in the beneficiary studies cited a seminal event - the need to work (in thehouse or outside), a pregnancy, lack of money for school materials, the incompetence or behaviorof a particular teacher - as a primary reason for dropping out of school, but many of these alsoconfessed that they did not like school in the first place (and hence may have expended littleenergy in trying to stay enrolled). The other half simply said that they found schooluninteresting.1 2

The 1996 Living Standards Survey also provides evidence that lack of interest in schoolis a major cause of non-attendance. An estimated 23 percent of poor 7-14 year olds and 41percent of poor 15-17 year olds who were out of school cited "lack of interest" as their mainreason for not attending. This information cuts two ways. On the one hand, it offers hope that ifschool conditions improve, more children may stay in school (not all dropouts leave school out offinancial necessity). On the other, the personalization of school failure can serve as a barrier tomaking the larger connection between low school quality, low achievement, and studentdropout. 13

8 The exception is Sao Paulo.9 Paes de Barros e Mendonca: "Consequencias da Repetencia sobre o Desempenho Educacional," 1998.10 Portela e Bastos: "O Des(conhecido) Universo da Sala de Aula," 1997.11 See: Portela e Bastos: "Educacao, Escola e Comunidade," 1997, and "O Des(conhecido) Universo daSala de Aula", 1997; Gurgel: "Ditos Sucesso Escolar," 1998, and "Ditos sobre Evasao Escolar," 1997.12 Gurgel: "Ditos sobre Evasao Escolar."13 Unpublished Bank analysis completed for the Brazil urban poverty strategy paper (forthcoming).

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Students value the collegial/social aspects of schooling, but theseare not recognized by school staff.

One of the high points of school for children is clearly the chance to socialize and makefriends among their schoolmates. For the most part, however, the socialization role of school isnot explicitly recognized by teachers or school staff.14 Nor is the fact that children enjoyinteracting with one another used to any advantage in the classroom: small group work is veryrare. On an informal basis, girls seem to work more with one another than do boys (andinterestingly have consistently higher test scores).15

Teachers consider training and orientation opportunities insufficient.

While many teachers display a lack of self-awareness with regards to their practice in theclassroom, the majority also believe that more training and orientation opportunities would helpthem to do their jobs better. In fact, students of teachers who did receive regular, school-basedpedagogical orientation did better on tests than those students of teachers who did not receivesuch orientation. Several teachers interviewed also indicated that there should be more follow-upto training offered, and that it was difficult to absorb new ideas into practice without such follow-up.

With regard to other issues related to improving school quality, teachers cited the needfor better teacher salaries, improved physical conditions, political commitment to improvingeducation, a closer relationship between the school and student families and more and betterteaching material with greater relevance to student lives.16

Municipal Secretaries of Education can articulate many of the problemsaffecting education at the primary level.

Municipal Secretaries of Education interviewed as part of a classroom observation studyin Bahia were cognizant of many of the main problems of education at the primary level,including repetition and dropout, physical and material conditions of schools, and teachertraining. In terms of their own capacity to make a difference in these areas, they cited problems oflack of resources, autonomy, trained professional teachers, political discontinuity, politicalinfluences in the appointment of administrators and teachers, and weaknesses in municipalinstitutions. The same secretaries also classified the relationship between the state and municipaleducation systems and political authorities as for the most part "purely bureaucratic," "distant,""no relationship," or "difficult."'7

While it is interesting that the politicization of staff appointments should be raised as anissue by the secretaries themselves, the study did not go further in probing whether any of thesecretaries would be willing or able to change that pattern under his or her own administration.As another background study on the unification of state and municipal education systems pointedout, the current overlap of responsibilities between the state and municipal levels may be highlyinefficient, but it persists for a reason. In the absence of clear responsibilities and transparentfunding mechanisms, the education system as currently constituted is rife with clientelistic

' Portela e Bastos: "Educacao, Escola e Comunidade."5 Portela e Bastos: "O Desconhecido Universo da Sala de Aula."

16 Portela e Bastos: "O Desconhecido Universo da Sala de Aula," and "Educacao, Escola e Comunidade."17 Portela e Bastos: "Educacao, Escola e Comunidade."

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relationships and patronage opportunities. To change the system is to significantly alter currentpolitical and social dynamics.18

IMPLICATIONS FOR THE PROJECT

Any project attempting to change the education landscape must take into accountstakeholder perspectives in addition to other information. The design and implementation ofFUNDESCOLA II will attempt to capitalize on some of these perspectives, while trying to alterothers.

Among the most positive of perspectives for the project is the widespread belief in thevalue of education, and a general belief among most stakeholders that the quality of primaryeducation needs to be, and can be, improved. Had studies shown a massive disaffection witheducation generally or complacency with the status quo, the project would have a much moredifficult task. There is also a fair degree of overlap in opinions regarding what needs to bechanged. Better physical conditions for schools, more and better material and equipment, a morerelevant curriculum, and better qualified teachers are mentioned again and again in interviewsacross a range of stakeholders. While the project's analysis can (and does) extend beyond andelaborate within these categories, clearly progress in these areas is necessary if beneficiaries andstakeholders are to "see" an improvement in the quality of education.

The design of the FUNDESCOLA program takes these perspectives into account. Repair ofschool buildings and equipping of classrooms are included in the project, within a largerframework of promoting the use of minimum operating standards and state and municipalcooperation in microregional planning. From the perspective of the education analyst, improvingthe framework for these inputs offers the best hope for addressing the root causes of poor physicaland material conditions in schools, over the long term. Hence, FUNDESCOLA incorporatesfinancing for school improvements within a comprehensive strategy that acknowledges its role asan important incentive for stakeholder participation. With regard to teacher training, the projectwill finance certification training for uncertified teachers, but will also (through the financing ofschool improvement projects) support school staff in defining their own training needs.)9 On apilot basis, the project will also explore a menu of pedagogic and curricular models proven to aidin student learning.

Attitudes and perspectives that represent a challenge for the project include: (1) the senseof disconnection and lack of shared perspectives between schools and their communities; (2) thelack of a common view among teachers and principals that student learning is their main priority(and the. lack of connection between student learning and "quality" among most stakeholders); (3)teacher misconceptions about repetition and literacy teaching; (4) lack of clarity about the role ofthe school; (5) the personalization of school failure; and (6) a fairly widespread"disempowerment" syndrome, whereby everyone complains about the system, but few (be theyparents or municipal secretaries of education) squarely assume the responsibility for change.

FUNDESCOLA's main mechanism for working at the level of the school and community(where many of these attitudes prevail) is the school development plan. Conceived as a joint

18 Plank, David: "A Unificacao dos Sistemas Escolares Estaduais e Municipais," 1998.19 Experience with school improvement projects under FUNDESCOLAI indicates that teacher training is oneof the main areas of investment. This corresponds with study findings that teachers themselves do not feelthat they have sufficient training.

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school-community exercise, the school development plan is also the most likely entry point tobegin to address some of the issues outlined above. Schools will be assisted in the development ofplans by school development teams, made up of municipal and state education staff; these staff,in turn, will receive training that will include exposure to some of these attitudes and guidelinesfor facilitation that will help schools and communities to begin to question them. Messages andactivities developed under the project's social mobilization and communication componentshould also help to reinforce alternative perspectives. As a concrete incentive for schools toparticipate in the school development process, FUNDESCOLA includes financing for schoolimprovement projects developed as part of the overall school plan.

At the state and municipal level, the project represents a fairly radical departure from thestatus quo and will doubtless entail a range of attitudinal and behavioral shifts. By forcing statesand municipalities to cooperate rather than compete for resources, the project should clarifyresponsibilities and raise issues of accountability that had hitherto been obscured. This process islikely to have its politically uncomfortable aspects. The challenge for the project will be todemonstrate to both states and municipalities, that politically they can "do well by doing right" inthe educational arena. Here again, social mobilization and communications activities includedunder the project should be helpful, both in maintaining pressure on political figures to do theright thing, and in helping to publicize the successes of those that do. Training for state andmunicipal education staff should give them a technical basis for decisions that in the past havetended to be ruled by politics. Concrete incentives for municipalities to "buy in" to and expandproject approaches have also been included - for example, a fund to support municipal efforts toexpand the school development process outside those schools selected by the project.

Finally, it will be important for monitoring and evaluation of the FUNDESCOLA programto include the gathering and dissemination of additional information on stakeholder perspectives.Some of this will be of course be done informally in the course of project implementation, duringtraining sessions, for example. Other mechanisms will include classroom observation studiesdone under the research subcomponent, the use of opinion surveys, and perhaps the involvementof the municipal forums in the design and implementation of "mini" beneficiary assessmentstudies in their own municipalities. Ultimately, it is important not only to assess whethereducational outcomes have improved by quantitative measures, but whether those involvedbelieve that things have improved, for the answer to that question will drive the politics ofeducation.

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Annex 9FUNDESCOLAII

Technical Annex

This annex outlines some of the salient technical issues of the project, including provisionfor teacher certification and upgrade, demand for schooling, and linkages among and between themultiple FUNDESCOLA projects.

TEACHER DEVELOPMENTACTIVITIES UNDER FUNDESCOLA

Experience under the Northeast Basic Education Projects, and earlier projects, show thatthe institutions responsible for teacher training in Brazil, namely universities and normal schools,are burdened by pre-existing commitments, and tend to employ traditional or academicapproaches to teacher training. The poor quality of teacher training is well supported by researchin Brazil. Analyses carried out using student achievement results from both the SAEB/95 andSAEB/97 assessments confirm that training activities for teachers and the possession of auniversity or normal school teaching degree or license has little or no correlation with studentperformance. On the other hand, teachers' education level and knowledge of the discipline theyteach does have a significant positive effect on student achievement. We know from research andpractice around the world that there are ways to raise teacher quality and their skills in helpingstudents learn. As mentioned in the technical summary, FUNDESCOLA has incorporated severalapproaches that take an end run around the institutions responsible for teacher training today.

a) Teacher Training under School's Own Financing. Of the millions in funds beingtransferred directly to schools, experience under FUNDESCOLA I shows that a significant portionwill be used by schools to hire teachers or specialists to carry out specialized and classroom-specific training of teaching staff.

b) Design-Based Training. A second approach to teacher development is found in the finalstep of the school-based development process. Whereas the teaching/learning designs developedunder the FUNDESCOLA I project are only going to reach the development and pilot testing phase(with the exception of "Escola Ativa," which will be more widely implemented as noted below),it is expected that in FUNDESCOLA III these designs will play a very substantial role in schoolimprovement and especially teacher development. Teacher development and support are, in fact,at the core of teaching/learning designs. Design-based training will include: on-site technicalassistance and training for the principal and teaching teams in implementing the design, summerplanning institutes, local and regional conferences for school leaders, annual school review andstrategic planning exercises, courses in continuous assessment, teaching to standards, use ofdesign-specific teaching and learning materials and methodologies, use of student achievementdata to better diagnose problems of individual students and target instruction, support for wholefaculty study groups and teacher learning circles, teacher assessment, within-school and cross-school observation, and distance training workshops. A number of these design-based teacherdevelopment activities play a part in the already successful Escola Ativa design, underimplementation today in over 170 schools under the FUNDESCOLA I project. Escola Ativa will beexpanded, with the support of the Ministry of Education, to over 690 rural and multi-gradeschools located in more than 150 municipalities in the three regions of FUNDESCOLA 11.

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c) Distance Teacher Training. Lastly, FUNDESCOLA has helped the Ministry of Education todevelop a low cost, results-oriented two-year distance education program, PROFORMAQAO, foreducating and training the nearly 70,000 uncertified teachers working in the region.

PROFORMAQAO is designed to provide Brazilian educators with a working model of a truedistance learning system that may help practitioners and decision makers avoid some of thewasteful technology driven experiments now seen in so many other parts of the world. More thanproviding a model, PROFoRMA(Ao has an important training effect by introducing a significantnumber of individuals into the practice of designing good quality distance education learningmaterials, others into facilitating learning through using these materials and others in organizingand administering these practices. Not least in importance, in the long run, it will have initiated asignificant number of school-teachers into the value of participating in the relatively self-directedprocess of being learners-at-a-distance.

The key features of the PROFORMACAO program are:

(a) Course design: The courses have been designed by national subject specialist leaders andare based on the Ministry of Education's National Curriculum Parameters. The content of thesubjects thus made available to the student-teacher in the most remote part of the country shouldtherefore be as good as that available to the most privileged urban university student. Thesecontent experts have learned much about designing distance education materials as they havebeen guided and assisted over a year-long period in writing and re-writing their subject matterunder direction of national and international distance education design experts. This work hasbeen formatted and edited for presentation in text and on video by leading experts in thesetechnologies. Moreover, the work has been informed by interviews and videotaped observationsof beneficiaries using a draft version of the material during field tests. With a substantialinvestment in this design, the quality of these learning materials is significantly better than can beprovided in more traditional training programs, yet when amortized over some 70,000 trainees, isof considerably lower average cost.

(b) Instruction. One of the most significant features of well-designed distance education isthe separation of the various processes normally associated with teaching, and their delivery by ateam of specialists in each process. In distance education systems, content experts are not indirect contact with learners, but their content is organized and delivered through a range of media.Similarly the special skill of assisting each individual learner absorb and process the otherwisemass produced materials into personal learning experiences is the work of specialists -- inFUNDESCOLA's PROFORMAQAO program referred to as Tutors. These tutors are selected aspersons familiar with the working environment of the trainees, as people psychologically as wellas physically accessible to the trainees, and as persons with more experience and generalknowledge of the work that the trainees have to undertake in their classrooms. Tutors are trainedin their responsibilities, particularly in knowing the limits of their responsibility, and monitoredby persons appointed by Training Agencies (under agreed TORs) at the State level, who are inturn trained and monitored by a specialist team at National level working with the Project team inBrasilia.

(c) Administration and management. PROFORMAcAo demonstrates one of the most recentinnovations in systematic distance education -- it is a system without an institution. It is a virtualsystem, using content experts from a dozen contributing organizations, technology specialistsfrom others, instruction and learner support, monitoring and evaluation from yet others. All areheld in place and organized by a very small administrative unit at MEC dealing with suchquestions as where and when team meetings are held and seeing that work of different specialists

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is coordinated to meet deadlines. Such a virtual system is even more cost-efficient thanorganizations like the Open University that employs its own content, design and instructionalresource personnel and also employ a large administrative staff.

(d) Learning and learners. Those who learn in PROFORMAQko will, by definition, have asignificant influence on the next generation of adults, including the next generation of school-teachers. Studying in a distance education system requires the learner to accept moreresponsibility for deciding when, where, and to some extent, how to study. Although studentsmeet in groups with a tutor and the direction of their discussions and activities is determined bythe course design team, the distance of content experts from the tutorial group inevitably throwstrainees to some extent on their own resources. Indeed, a good design team takes this reality intoaccount and tries to steer course assignments in a direction that capitalizes on the local knowledgeand initiatives of the trainees themselves. Distance from an instructor is found to be a liberatingexperience, provided course materials provide sufficient structure and course tutors are welltrained to give support to learners when needed. In summary, PROFORMAQAO is a process thatreinforces a philosophy of empowering and enabling trainee teachers to become more self-reliant,more creative, and more independent thinkers as well as more knowledgeable in the subjects oftheir instruction.

USING QUALITY INVESTMENTS TO STIMULA TE DEMAND FOR SCHOOLING

With the implementation of a "funding-follows-the-student model" through the FUNDEF,both states and municipalities have greater incentive to get children into school. Encouragingchildren to avoid dropping out or repeating a grade will require focusing on making school moreattractive by improving school quality, as detailed below.

Why Demand for Schooling is a Function of School Ouality. From an economicperspective, parents' interest in sending their children to school, and children's interest in going toschool, attending regularly, and completing the primary cycle, are directly related to what theyboth believe they will gain from this investment in time, effort, and money. Children drop outwhen they or their parents conclude that the benefits of schooling do not exceed the costs ofgoing to school. The benefits considered by parents and children include the immediate benefitsassociated with learning and participation in the schooling process, along with the expected futurebenefits associated with recognition that earnings may be higher for those who complete moreschooling. Immediate benefits can serve to increase demand for children to attend school andpersist until school completion to the degree that children enjoy the learning that takes place, theschool experience itself, and the satisfaction of progressing through the educational cycle. Futurebenefits are the expected additional earnings or other returns. Future benefits, too, are a functionof school quality. To the degree that future productivity depends on educational achievement, asthe human capital model postulates, and not just on attainment, then individuals who acquirehigher levels of learning because of higher quality schooling will be more productive in the labormarket, benefit more from on-the-job training, and be rewarded in terms of additional earningsand job satisfaction.

Why demand for education is a function of the costs of schooling. The costs that a familyconsiders in its calculation of demand for schooling may include the personal costs experiencedby the child associated with going to school, as well as the more traditional costs associated withthe forgone earnings of child labor and the forgone returns from domestic help. Although it maynot be quantifiable, a young child may experience a significant personal cost associated withconstant exposure to failure, persistent repetition, low expectations, and an unpleasant or unsafe

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environment. Families may have to bear the costs associated with forgone earnings to the degreethat school-age children are required by their parents to bring income into the family from workin the labor market, or to provide domestic help to parents who themselves may be workingoutside of the home. In addition, families have to bear direct costs associated with uniforms,educational materials, and, in some cases, transportation costs. These two types of costs are addedto the personal costs of school attendance and serve to reduce demand for school attendance andcompletion.

Benefits and the poor. Poor children may have lower demand for schooling because theyexperience lower benefits from schooling. With respect to the "immediate benefits" of schooling,FUNDESCOLA data show that poor children are enrolled or are located in neighborhoods withschools that are in poorer than average conditions -- schools that are further from minimumoperational conditions. Poor children are more likely to have unqualified, less educated teachers.These less skilled teachers are less able to diagnose learning difficulties of poor children andidentify the appropriate instructional strategies. To make matters worse, research shows thatteachers in Brazil tend to have lower learning expectations for poor children. These lowerexpectations translate into less direct attention from teachers who assume that poor children willfail anyway. Failure for these children confirms teachers' own prejudice. BeneficiaryAssessments conducted with the support of the World Bank, Unicef, and the Ministry ofEducation provide evidence that poor families tend to have less understanding of the "futurebenefits" of schooling. First, the poor tend to live in communities with little experience ofsuccess associated with educational attainment. In poor communities, because there is littlevariance in educational attainment, differences between the rich and the poor are believed to bemore a consequence of luck or cunning than educational level. The beneficiary assessments alsopoint out that poor families tend not to believe that their children can escape from poverty byschooling.

Costs and the poor. Poor children and their families also experience relatively higherindirect costs of schooling. Schooling is often an unpleasant experience for poor childrenbecause their teachers have such low esteem for them, because they are more likely to be leftback, and because they may have a harder time learning as a consequence of inadequate pre-school preparation, inadequate diet, and lack of support at home. Some evidence suggests thatpoor children are somewhat more likely to be required by their families to work at or even awayfrom home, although the LSMS results did not support this finding. In any case, opportunitycosts may figure into poor families' demand calculations. Direct costs of transportation, uniform,or other miscellaneous school supplies represent a higher share of poor families' incomes.

What FUNDESCOLA does to increase the benefits and reduce the costs of schooling for thepoor. FUNDESCOLA directly attacks the benefit side of the demand equation by emphasizingschool quality improvements through (a) raising schools up to minimum operational standards,including showering the schools with books (continuing the investments of the Northeast BasicEducation Project) (b) giving resources to the schools to promote school autonomy, (c) educatingunqualified teachers, (d) supporting school development planning with the support of the parentcommunity, and (e) improving the school learning climate. Items a through c disproportionatelybenefit poor children who are today in the worst schools with the most unqualified teachers.Through social marketing and communication, component four of the project, FUNDESCOLA alsoreaches out to parents to discourage child labor and to encourage them to have a positive attitudeto education at home and to participate more in education and the school development process.The campaign will target teachers to promote the idea that all children can learn and emphasizethat they are the central players in student learning and in supporting a positive learningenvironment at school. The campaign will also target children to show them that education is thekey to success, and that their effort is the key ingredient in the recipe of this success.

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FUNDESCOLAII Annex 9Technical Annex

LINKS BETWEEN FUNDESCOLA PROJECTSFUNDESCOLA I helped 100% of the targeted schools produce School Development Plans,

implemented the microplanning information system for all of the targeted microregions,promoted the full operation of the forums, facilitated agreement of states and municipalities ontheir microregion action programs, financed the school autonomy subcomponent, and launchedbidding documents for new furniture, school equipment, and learning materials for all of thetargeted microregions. The Bank is highly satisfied with project management andimplementation.

The government will expect to negotiate FUNDESCOLA III when the FUNDESCOLA II Projecthas disbursed 50% of its loan amount. That target is expected to be achieved before March 2001.The loan amount for that project should be in the order of US$387.5 million.

Strategy: FUNDESCOLA III will have the same objectives of FUNDESCOLA I , and will bedesigned around the same basic strategy, with a few notable exceptions:

(a) Step 5 of the School-Based Development Process (Implementing Teaching LearningDesigns) will be substantially strengthened. During the next 18 months, with financing fromFUNDESCOLA II, a number of these designs will be identified, developed, tested, and packagedfor implementation. Support teams will be identified and trained, training programs prepared,and teaching/learning materials developed. These programs will then be made available andexported by the project.

(b) Institution building (under part 2 of FUNDESCOLA's strategy for strengthening schools,secretariats, and public support for education) will be enhanced for a selected group ofmunicipal and state education secretariats willing to undertake substantial changes under theSecretariat Management and Business Plan. These secretariats will be helped in undertakinga full restructuring of their education system focused on what their schools need, not based ontop-down requirements. Second, the FUNDESCOLA III project will help these secretariats ofeducation undertake a number of critical actions necessary for supporting step five of theSchool-Based Development Process. These include: (i) an investment fund for schoolreform; (ii) support for a professional development infrastructure that supports school reform;(ii) the adoption of clear and objective leaming standards and the use of a formal criterion-referenced student assessment system designed to measure achievement against thesestandards; (iv) the decentralization of authority over budgets, staffing, and curriculum andinstructional strategies to schools that have effective school development plans tied to thestandards; (v) the direct engagement of a broad array of publics around school and municipalperformance, promoting accountability; and (iv) support for division of responsibility foreducation between state and municipal governments.

(c) School director training, included as part of component 5 in FUNDESCOLA II, will beexpanded significantly as part of FUNDESCOLA III's effort to disseminate and expand the reachof the School-Based Development Process to as many schools as possible in the three regionsof the Project. The model for this training program will be based upon PRASEM, the highlysuccessful training program for municipal secretaries of education initiated under the Call toAction ESW dissemination program, and expanded substantially under NEBE II andFUNDESCOLA I.

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Enhanced Sustainability: The FUNDESCOLA III project will provide additional incentives toexpand and to institutionalize the School-Based Development Process, including additionalrounds of School Improvement Projects and incentive funds to expand school development plansto non-targeted schools.

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Institutional Annex


Institutional Development Annex

Institutional Development under FUNDESCOLA II

One of the features that distinguishes the FUNDESCOLA II project from its predecessors isthe emphasis given to institutional development of State and Municipal Secretariats.

Brazilian public primary education, as stated elsewhere in this document, is characterizedby parallel but uncoordinated municipal and state systems. Before FUNDESCOLA, theseoverlapping administrative systems had little incentive to cooperate, optimize resources, orreduce inequalities among and between their jurisdictions. FUNDESCOLA I was designed to fosterdialogue at the microregion level by promoting transparent information sharing through thecreation of Forums and joint municipal/state activities. This dialogue was a pre-requisite forparticipation in the project. It also provided instruments, technical assistance and training for highlevel education managers and technicians. These activities, many completed prior to Projectimplementation, allowed for secretariats not only to have a clearer vision of the FUNDESCOLAproject, but also of their shared education system realities and expectations for improvement.

These efforts did not constitute a distinct subcomponent of FUNDESCOLA I. Rather, underFUNDESCOLA I, a small group of specialists, in the course of their FUNDESCOLA coordinatingactivities (including technical assistance and training for states and municipalities), becamecatalysts for dialogue and cooperative planning. Their efforts were directed at a very specific andpolitically sensitive clientele: state and municipal education managers and lead administrators.

FUNDESCOLA II begins where FUNDESCOLA I left off, with professionals from theMinistry of Education coordinating the complex dialogue of the Forum. The expansion of theProject to an additional seventeen microregions under FUNDESCOLA II required a new strategy,namely the creation of new mechanisms that would permit secretariats, on their own, to improvetheir management practices, continue dialogue among and between systems, and incorporate thestrategies, processes and instruments developed under FUNDESCOLA I into their strategicframework as well as into their routine operational practices.

From a overall strategic planning point of view, this is a continuation of FUNDESCOLA Iand should contribute to the sustainability of the activities financed by that project and itsexpansion. Responsibility for the development of this task will be placed with a team ofconsultants and specialists capable of providing technical assistance for the professionaldevelopment of leadership in the secretary of education.

Given the importance of continuity and sustainability of the project strategies and actions inparticipating states and municipalities, the need to rationalize operational procedures in thesecretariat and the possibility of significant financial support under FUNDESCOLA II, thesubcomponent "Institutional Development" (FUNDESCOLA I) was given greater emphasis andredesigned as a specific component for FUNDESCOLA II This component acts in complement toother project components, especially the Social Mobilization Component, conceived as animportant element for promoting the sustainability and expansion of FUNDESCOLA programactivities. Institutional Development as promoted by the FUNDESCOLA program is based on acollection of actions, structured in two parts, described below.

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Strengthening State and Municipal Coordination

This part of the institutional development component focuses on three operational principlesconsidered crucial to the development of primary education in the project regions andmicroregions. These principles are affirmed through the establishment of the Forum, a politicalinstance created exclusively for FUNDESCOLA that unites mayors and UNDIME (Union ofMunicipal Directors) under the coordination of the State Secretary of Education. In addition,these principles are invoked in the elaboration, execution, and supervision of FUNDESCOLAinstruments, including the PAM (Municipal Action Program), PAE (State Action Program) andPAZ (Microregion Action Program) as well as the Participation Agreement, essential conditionsfor participation in FUNDESCOLA. These three principles are:

(i) Integration of education policies and initiatives between and among state andmunicipal governments within the same microregion to optimize and rationalize thesupply of educational services among the diverse systems, promoting the exchange ofexperiences among various education practitioners and the clear division ofresponsibilities among government entities responsible for providing primary education;

(ii) Transparencv in the definition and allocation of resources in order to promote trust,as well as a shared vision of the availability and use of the total existing and expectedfinancial resources (including from FUNDESCOLA), in accordance with the diversity offunding sources for financing of primary education in the microregions. One of the moreeffective tools in promoting transparency is the school network microplanninginformation system, a highly technical school mapping procedure which uses educational,demographic, and geographic information to catalogue levels of quality (inputs, services,and results) and equity on a school by school and community by community basis. Thissystem demonstrates disparities in Minimum Operational Standards across schools indifferent systems, and highlights differences in educational performance. Thisinformation helps decision-makers from a variety of jurisdictions share information froma reliable and valid sources, and reach agreement on cooperative planning, rationalassignment of enrollment, and location of new or replacement construction.

(iii) Commitment on the part of municipal and state directors to FUNDESCOLA goals andobjectives. This commitment is assured through signature of the regional action plan(PAZ), guarantee of the implementation of activities set out in their respectiveeducational plans (PAM), and through leadership strengthening activities of the Forum.

Previous efforts will be incorporated into FUNDESCOLA II by means of the supervision, evaluation,and possible adjustment of the programming mechanisms (PAM, PAE and PAZ). The role of theForuiw, in this process is as an informal political association capable of defining and supervisingthe completion of objectives and goals for the microregion. In order that the member secretariatscan pursue and attend to these goals, they should develop strategies, incorporate adequateprocedures and instruments, and promote the professional development of managers andtechnicians linked to improving the quality of expected educational outcomes, to optimize theallocation of available human and financial resources, and reduce existing education inequalities.Subcomponent B, below, describes how the FUNDESCOLA project contributes to development ofthe management framework.

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Implementation Strategy:

This subcomponent promotes and finances seminars, workshops (such as the "Program forSupport of Municipal Secretaries of Education" -PRASEM) and Forum meetings, debates, studytours and other activities linked to the professional development of state and municipal educationmanagers.

A. PRASEM. This intensive seminar series disseminates information on educational financing,legislation, management practices and educational outcomes to all municipal and state secretariatsof education in each of the project states. Working together over a period of a week, Municipaland State Secretaries of Education and Mayors (or Finance Secretaries) calculate their FUNDEFresources, elaborate model career plans, and learn about innovations in school autonomy andmanagement, and education system reforms.

B. Forum activities. The Forum provides an environment for defining regional and local needs,aggregating municipal indicators to form regional project indicators, and establishing benchmarksfor project implementation and monitoring. The key tool used in this process is the ProjectLogical Framework. State and Municipal education administrators meet to elaborate and monitorthe implementation of the microregion logical framework, review results of the microplanningprocess, improve transparency of information, examine data in both systems, and agree on waysto improve outcomes for all children in their region.

Institutional Developmentfor Secretariats of Education

This part of the institutional development component describes a collection of activities andprocesses to be developed and incorporated by individual secretariats of education in theirstructure, based on the strategies, instruments, processes and mechanisms developed byFUNDESCOLA to attain the goals established in the PAM, PAZ and PAE, and primarily, toguarantee the continual improvement of education system performance.

Under this subcomponent, with the technical support of the Project, the education managers andtechnical body of the secretariats will complete a Secretariat Management and Business Plan(PGS-Plano de Gestao da Secretaria) in order to rationalize decision-making and execution ofstrategic actions.

The PGS is founded upon three principles. These principles represent trends observed throughoutBrazil in various state and municipal education programs and plans.

(i) Effectiveness. To effectively promote quality, the system (including all schools)should first agree to common student learning standards based on the nationalcurriculum. These standards should specify what each student should know and be able todo upon completion of each grade. Second, the secretariat should periodically administerachievement tests linked to these curriculum parameters that permit meaningfulevaluation of student learning. The secretariat should inform schools and the communityof the results of these assessments. Moreover, these results should be treated asdiagnostic instruments, to be used by the secretariat and schools to continually improveeducation results. Lastly, in order to focus its efforts and resources on improving learningfor all students, schools need to conduct a strategic planning process of its own, with theparticipation of the school community, and the technical support and supervision of thesecretary.

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Institutional Annex

For its part, the secretariat should reorganize its structure in order to give priority todevelopment of its schools. The PGS incorporates this vision of school effectiveness byaligning learning standards with the National Curriculum Parameters (PCN); encouragingexpansion of SAEB-based exams and internalization of innovations such as the PDE,EscolaAtiva, and teachers/learning designs aimed at increasing student achievement.

(ii) Equity is promoted through the correction of inequalities in the supply of educationalservices. Differences in operational condition of the school can be observed within andbetween systems. For a school system to attain acceptable levels of quality, each andevery school must meet Minimum Operational Standards. Once these standards havebeen met in all schools, the secretariat should maintain operational equity to achieveincreases in student achievement.

The PGS should promote the incorporation and adjustment to local reality of the conceptsand instruments that make Minimum Operational Standards possible, includingEducation Microplanning and the School Survey (LSE). Once these instruments areoperationalized, secretariats that participate in the PGS process should define andimplement strategies to raise all schools to Minimum Operational Standards.

(iii) Efficiency is understood as the optimal allocation of financial, human and materialresources in order to maximize education system performance. This can be measured byindicators such as student-teacher ratio, average number of students per classroom, perstudent and per graduate unit costs, student flows, ratio of administrators to students,decentralization of budget responsibilities, teacher career planning, direct school transferprograms and relative weight of resources allocation-administration vs. classroomexpenditures, etc.

Strategies for improving school-level efficiency include increasing school autonomy,creating school/teacher accountability mechanisms (such as a form to justify studentrepetition), encouraging the creation of a school team to maintain and improve the cadreof teachers, and optimal allocation of staff on a school by school basis. Mechanisms forimproving system-level efficiency include aggregating school level indicators and needsto create management plans and demand-based mechanisms for improvement, monitoringand evaluating programs, and optimizing and reorganizing secretariat and regionalmanagement staff to better support schools.

Implementation Strategy:

The component includes a process of training and technical assistance directed toward leaders(management and administrators) of education secretariats, based on previously definedguidelines that should provide the secretariat with the basic conditions to:

a) establish values, vision, and mission;b) define a strategic plan with priorities and goals;c) develop specific strategies for achieving these goals;d) map out operational procedures;e) adjust operational procedures in accordance with FUNDESCOLA requirements;f) institutionalize these new procedures.

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FUNDESCOLA II Annex 10Institutional Annex

In accordance with the innovative nature of this process, the DGP will direct initialimplementation of this subcomponent on a pilot basis, in at least two State and MunicipalSecretariats. These secretariats will be selected based on their level of commitment to thestrategies, instruments, and processes suggested by FUNDESCOLA. This strategy assumes a jointeffort on the part of the secretariat and FUNDESCOLA project staff to construct and put into actionthe PGS so that it can be expanded to other interested states and municipalities underFUNDESCOLA III.

During this process the DGP team will be supplemented by consultants and specialists that cancollaborate in the future expansion of the experience. The secretariats selected for the pilot willsign a commitment contract that establishes the conditions of participation and the possibility forcollaboration and dissemination of their experience to other secretariats under the next project.

The underlying concept of the PGS is that while school-based reform is an effective startingpoint, changes in governance and restructuring of central offices need to occur in order to providea healthy environment for increasing school autonomy and effectiveness. Configuration of centraloffices to effectively support schools will then guide reforms of the secretariat itself. Particularchallenges to school reform at the central level include: making individual school accountable forresults, creating mechanisms to optimize allocation of human and financial resources, makingstandards operational, implementing professional development strategies, and developingmechanisms for feedback.

Expected ResultsAt the end of the FUNDESCOLA II project the following three products are expected:a) Manual for the preparation and implementation of the PGS;b) Consultants trained in the PGS process;c) Expansion strategy formulated for FUNDESCOLA III.

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FUNDESCOLA II Annex 11Project Processing Budget and Schedule


Project Processing Budget and Schedule

A. Project Budget (US$000) Planned Actual

200,000 150,000

B. Project Schedule Planned Actual

Time taken to prepare the project (months) 11 9First Bank mission (identification) 06/01/98 08/10/97Project Concept Paper review meeting 12/11/98 12/11/98Project Appraisal Document review 01/11/99 01/11/99Negotiations 04/15/99 04/19/99Board Presentation 06/08/99Signing 07/30/99Effectiveness 08/15/99Prepared by: Ministry of EducationC. Bank staff and consultants who worked on the project included:

Name SpecialtyRobin Horn Task Manager/Education EconomicsAlberto Rodriguez Education AssessmentChris Parel Economist/Country OfficerSergei Soares Consultant, Economic AnalysisKarla McEvoy Environmental Analysis and Project CostingKimberly Nead Consultant, Poverty AnalysisAmber Gove Consultant, Project PreparationTulio Correa Financial ManagementSusana Amaral Disbursement AnalysisDaniela Marques Project AnalysisJose Baigorria Pera ProcurementNicia Wernek Social Mobilization ConsultantAdriana Weisman Operations AnalystKatia Macedo Project Assistant

D. Ministry of Education staff and consultants who worked on the project included:Ant6nio Emilio Sendim Marques Project DirectorAnt6nio Augusto de A. Neto Project Design and StrategyMaria Helena Guimaraes de Castro President of INEPJoao Batista Gomes-Neto Director of Education Information & StatisticsMaria Ines Gomes de Sa Pestana Director of Basic Education EvaluationJose Amaral Sobrinho Education ManagementRonyse Pacheco Project FinancingAnt6nio Carlos Xavier Project AdvisorGilberto Costa Communications and Public RelationsWilsa Maria Ramos Proforma9do Teacher Certification Program

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FUNDESCOLA II Annex 12Documents in the Project File


Documents in the Project File

A. Project Operations and Implementation Manual (MOIP) - FUNDESCOLAI

B. Other1. Plano Nacional de Educa,ao Brasilia, 1998.2. Evolucao da Educacao Basica no Brasil: 1991-1997. Instituto Nacional de Estudos e PesquisasEducacionais - INEP, Brasilia, 1997.3. Fundo de Manutencao e Desenvolvimento do Ensino Fundamental e de Valoriza,ao do Magisterio:guia para sua operacionalizacao. Ministerio da Educa,ao e do Desporto -MEC, Fundo Nacional deDesenvolvimento da Educacao - FNDE, Sao Paulo 1997.4. Carta Lei Darcy Ribeiro no. 9.394, de 1996: emendas a constituicao nos. 11 e 14, de 1996 e Lei 9.424,de 1996, Diretrizes e Bases da Educacao Nacional. Gabinete do Senador Darcy Ribeiro, Brasilia, 1997.5. Sistematica de Financiamento do Ensino Fundamental. Fundo Nacional de Desenvolvimento daEduca§ao - FNDE, Ministerio da Educacao e do Desporto -MEC, Brasilia, 1997.6. Dinheiro na Escola: procedimentos operacionais. Ministerio da Educacao e do Desporto - MEC,Brasilia. 1997.7. Manual de Orientacao para Constituicao de Unidades Executoras. MEC - Secretaria de EducacaoFundamental, Brasilia, 1997.8. Informe Estatistico 1, 1996: Brasil, Norte, Nordeste, Sudeste, Sul, Centro-Oeste. Instituto Nacional deEstudos e Pesquisas Educacionais - INEP, Brasilia, 1997.9. Informe Estatistico 2, 1996: Rond8nia, Acre, Amazonas, Roraima, AmapA, Para, Tocantins. InstitutoNacional de Estudos e Pesquisas Educacionais - INEP, Brasilia, 1997.10. Informe Estatistico 3, 1996: Maranhao, Piaui, CearA, Rio Grande do Norte, Pernambuco, Alagoas,Sergipe, Bahia. Instituto Nacional de Estudos e Pesquisas Educacionais - INEP, Brasilia, 1997.11. Informe Estatistico 4, 1996: Minas Gerais, Espirito Santo, Rio de Janeiro, Sao Paulo. InstitutoNacional de Estudos e Pesquisas Educacionais - INEP, Brasilia, 1997.12. Informe Estatistico 5, 1996: Parana, Santa Catarina, Rio Grande do Sul. Instituto Nacional de Estudosc Pesquisas Educacionais - INEP, Brasilia, 1997.13. Informe Estatistico 6, 1996: Mato Grosso do Sul, Mato Grosso, Goias, Distrito Federal. InstitutoNacional de Estudos e Pesquisas Educacionais - INEP, Brasilia, 1997.14. Sistema Nacional de Avaliac§o da Educacao BAsica, SAEB/95: resultados estaduais. InstitutoNacional de Estudos e Pesquisas Educacionais - INEP, Brasilia, 1997.15. Ditos sobre a Evasao Escolar: estudos de casos no estado da Bahia. Paulo Roberto Holanda Gurgel.Ministerio da Educagao e do Desporto - MEC, Projeto de Educa,ao BAsica para o Nordeste, Brasilia, 1997.16. Educa9ao, Escola e Comunidade: estudo piloto no estado da Bahia. Adelia Luiza Portela and EniSantana Barretto Bastos. Ministerio da Educacao e do Desporto - MEC, Projeto de Educacao Basica para oNordeste, Brasilia, 1997.17. Chamada A Acao: combatendo o fracasso escolar no Nordeste. Projeto Nordeste, Banco Mundial,UNICEF, Brasilia 1997.18. Lioes e Praticas 1-13. Varias Autores, Projeto Nordeste, Banco Mundial, UNICEF, Brasilia 1997.19. Guia de Consulta, Programa de Apoio aos Secretarios Municipais de Educacao (PRASEM). ProjetoNordeste, Banco Mundial, UNICEF, Brasilia 1997.20. Lessons from New American Schools' Scale-Up Phase, Susan R. Bodilly, Rand Corporation, 1998.21. Design-Based Assistance as a Cornerstone of a School Improvement Strategy, Thomas K. Glennan,Jr., New American Schools. 1997.22. How to Create Incentives for Design-Based Schools, Paul T. Hill, New American Schools, 1997.23. How to Engage Educators, Parents, and the Community in Design-Based School Change, NAS, 1997.24. Blueprints for School Success: A Guide to New American Schools Designs, Educational ResearchService, 1998.25. Creating World Class Schools: A Progress Report on the Memphis City Schools, Memphis CitySchools, 1997.

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Status of Bank Group Operations in BrazilOperations Portfolio

Difference Betweenexpected

Original Amount in US$ Millions and actual Last PSR

Fiscal disbursements a/ Supervision Rating b/

Project ID Year Borrower PurposeIBRD IDA Cancel. Undisb. Orig Frm Rev'd Dev Obi Imp Prog

Number of Closed Projects: 194

Active ProjectsBR-PE-6414 1989 COCGAS, SAO PAULO NTRL GAS DIST 94.00 0.00 0.00 .04 .02 0.00 S S

BR-PE-6370 1989 FEDERATIVE REPUBLIC OF BR NE IRRI JAIBA 71.00 0.00 0.00 1.25 1.27 0.00 S S

BR-PE-6473 1990 STATE OF SANTA CATARINA LND MM4T II-S. CATAR 33.00 0.00 0.00 1.09 1.13 1.13 S S

BR-PE-6453 1990 FEDERATIVE REPUBLIC OF BR NE IRRIG I 210.00 0.00 69.00 18.61 87.62 18.62 S S

BR-PE-6505 1992 GOVERNMENT OF BRAZIL NATO GROSSO NAT RES 205.00 0.00 0.00 62.49 62.49 0.00 5 S

BR-PE-6368 1992 GOVERNWENT WATER SECTOR MODERNI 250.00 0.00 0.00 3.25 3.25 0.00 S S

BR-PE-6547 1993 FED.REP.OF BRAZIL METRO TRANSP. RIO 128.50 0.00 0.00 .29 .30 0.00 S S

BR-PE-6541 1993 S.PAULO/PARANA STS. WTR Q/PLN(SP/PARANA) 245.00 0.00 9.30 30.78 40.06 -6.24 S S

BR-PE-6540 3993 NINAS GERAIS ST. WTR Q/PLN(MINAS GERA 145.00 0.00 5.00 2.29 7.28 2.28 S U

BR-PE-6555 1994 STATE GOVTS STE KwY MGT 1I 220.00 0.00 36.00 6.20 33.19 6.19 S S

BR-PE-6558 1994 REPUBLIC OF BRAZIL PARANA BASIC EDUC 96.00 0.00 0.00 19.44 9.43 0.00 S S

BR-PE-6452 1994 MINISTRY OF EDUCATION NE BASIC EDUC III 206.60 0.00 0.00 23.63 20.13 0.00 S S

BR-PE-6543 1994 GOVERNMENT M. GERAIS BASIC EDUC 150.00 0.00 0.00 20.31 13.30 0.00 S S

BR-PE-6522 1994 ST.OF ESPIRITO SANTO ESP.SANTO WATER 154.00 0.00 4.00 72.97 70.36 3.13 U U

BR-PE-6524 1994 ST.OF MINAS GERAIS MINAS MNC.DEVELOPMT 150.00 0.00 5.00 29.44 34.41 29.41 S S

BR-PE-38885 1995 GOVT OF BRAZIL RURAL POV.-SERGIPE 36.00 0.00 0.00 11.37 .07 0.00 5 5

BR-PE-38882 1995 FED REPUBLIC OF BRAZIL RECIFE M.TSP 102.00 0.00 0.00 71.95 43.97 0.00 S S

BR-PE-6436 1995 STATE OF CEARA ZIL CEARA UR.DV/WATER CO 140.00 0.00 0.00 61.27 51.25 -20.75 5 5

BR-PE-6564 1995 FED REPUBLIC/BRAZIL BELO H M.TSP 99.00 0.00 0.00 44.07 28.86 0.00 5 S

BR-PE-38884 1995 GOVT OF BRAZIL RURAL POV.- CEARA 70.00 0.00 0.00 22.41 -.19 0.00 S S

BR-PE-35717 1995 GOVT OF BRAZIL RURAL POV. (BAHIA) 105.00 0.00 0.00 43.12 12.14 0.00 5 5

BR-PE-40028 1996 FEDERATIVE REPUBLIC OF BR RAILWAYS RESTRUCTURG 350.00 0.00 50.00 37.42 37.42 0.00 S S

BR-PE-6554 1996 FED. REP. OF BRAZIL HLTH SCTR REFORM 300.00 0.00 0.00 226.55 131.54 0.00 S S

BR-PE-37828 1996 STATE OF PARANA (PR)R.POVERTY 175.00 0.00 0.00 140.71 88.31 0.00 5 5

BR-PE-6512 1996 CVRD ENV/CONS(CVRD) 50.00 0.00 O.O0 23.16 12.17 0.00 U U

BR-PE-46052 1997 CEARA WTR PILOT 9.60 0.00 0.00 7.89 7.89 0.00 S S

BR-PE-48870 1997 THE STATE OF MATO GROSSO NT STATE P5tIV. 45.00 0.00 0.00 45.00 35.01 0.00 HS S

BR-PE-43873 1997 FED.REP.OF BRAZIL AG TECH DEV. 60.00 0.00 0.00 49.88 15.50 0.00 S S

BR-PE-43868 1997 STATE OF RGS RGS LAND MGT/POVERTY 100.00 0.00 0.00 89.45 18.29 0.00 S S

BR-PE-38896 1997 STATE OF RGN R.POVERTY(RGN) 24.00 0.00 0.00 15.25 3.75 0.00 5 S

BR-PE-6562 1997 STATE OF BAHIA BAHIA MUN.DV 100.00 0.00 0.00 98.26 32.26 0.00 S S

BR-PE-6475 1997 FED. REP. OF BRAZIL LAND RFM PILOT 90.00 0.00 0.00 61.25 13.89 0.00 S S

BR-PE-42566 1997 STATE OF PERNAMSUCO R.POVERTY(PE) 39.00 0.00 0.00 16.36 .17 0.00 S S

BR-PE-43871 1997 STATE OF PIAUI (PIAUI)R.POVERTY 30.00 0.00 0.00 9.06 -4.74 0.00 S S

BR-PE-6532 1997 FEDERAL GOVERNMENT FED HWY DECENTR 300.00 0.00 0.00 261.02 81.03 0.00 U U

BR-PE-34578 1997 RIO GRANDE DO SUL RGS KWY MGT 70.00 0.00 0.00 66.70 21.70 0.00 S S

BR-PE-57910 1998 GOVERNMENT OF BRAZIL PENSION REFORM LIL 5.00 0.00 0.00 5.00 5.00 0.00 HS S

BR-PE-51701 1998 STATE OF MARANHAO MARANHAO R.POVERTY 80.00 0.00 0.00 69.14 5.64 0.00 S S

BR-PE-42565 1998 STATE OF PARAIBA PARAIBA R.POVERTY 60.00 0.00 0.00 48.56 .36 0.00 S S

BR-PE-43421 1998 STATE OF RIO DE JANEIRO RJ M.TRANSIT PRJ. 186.00 0.00 0.00 186.00 76.65 0.00 S S

BR-PE-48357 1998 REPUBLIC OF BRAZIL CEN.BANK TAL 20.00 0.00 0.00 16.83 6.33 0.00 S S

FUNDESCOLA JJ

Annex 13Status of Bank Group Operations in Brazil

113

Difference Betweenexpected

Original Amount in US$ Millions and actual Last PSR

Fiscal disbursements a/ Supervision Rating b/

Project ID Year Borrower PurposeIBRD IDA Cancel. Undisb. Orig Frm Rev'dd Dev Obj Imp Prog

BR-PE-43420 1998 FED. REPUBLIC OF BRAZIL WATER S.MOD.2 150.00 0.00 0.00 150.00 27.99 0.00 S S

BR-PE-40033 1999 THE STATE OF MINAS GERAIS MG STATE PRAV. 170.00 0.00 0.00 170.00 120.01 0.00 S B

BR-PE-38895 1998 GOVERNMENT OF BRAZIL FED.WTR MGT 198.00 0.00 0.00 178.73 35.72 0.00 S S

BR-PE-6549 1998 TBG GAS SCTR DEV PROJECT 130.00 0.00 0.00 130.00 67.00 0.00 RS HS

BR-PE-6559 1998 THE STATE OF SAO PAULO (BF-R)SP.TSP 45.00 0.00 0.00 45.00 20.75 0.00 S S

BR-PE-6474 1998 STATE OF SAO PAULO LAND MGT 3(SP) 55.00 0.00 0.00 55.00 7.00 0.00 S U

BR-PE-50762 1998 GOV. OF BRAZIL FUNDESCOLAI 62.50 0.00 0.00 27.13 -24.11 0.00 S S

BR-PE-38947 1998 GOVERNMENT OF BRAZIL SC. a TECH 3 155.00 0.00 0.00 138.99 21.49 0.00 S B

BR-PE-35728 1998 STATE OF BAHIA BAHIA WTR RESOURCES 51.00 0.00 0.00 41.22 17.96 0.00 S S

BR-PE-58129 1999 FEDERAL GOVERNMENT EMER. FIRE PREVENTIO 15.00 0.00 0.00 15.00 0.00 0.00 U U

BR-PE-54120 1999 GOVERNMENT OF BRAZIL AIDS 2 165.00 0.00 0.00 144.99 -20.01 0.00 S S

BR-PE-43874 1999 GOVERNMENT OF BRAZIL DISEASE SURVEILLANCE 100.00 0.00 0.00 100.00 0.00 0.00 S S

Total 6,300.20 0.00 178.30 3,215.82 1,382.31 33.77

Active Projects Closed Projects Total

Total Disbursed (IBRD and IDA): 2,906.08 17,967.09 20,873.17

of which has been repaid: 261.42 13,405.00 13,666.42

Total now held by IBRD and IDA: 5,860.47 4,659.93 10,520.40

Amount sold : 0.00 45.83 45.83

Of which repaid : 0.00 45.83 45.83

Total Undisbursed : 3,215.82 97.83 3,313.65

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS = highly Satisfactory, S = satisfactory, U - unsatisfactory,

HU = highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994.

Note:Disbursement data is updated at the end of the first week of the month.

FUNDESCOLA 11 Annex 13Status of Bank Group Operations in Brazil

114

Brazil at a glance 9/16/98

Latin Upper-POVERTY. and SOCIAL America middle- [

Brazil & Carib. income Development diamond*1997Population, mid-year (millions) 163.5 494 571 Life expectancyGNP per capita (Atlas method, US$) 4,720 3,880 4,520GNP (Atlas method, US$ billions) 771.9 1,917 2,584

Average annual growth, 1991-97

Population (°/) 1.4 1.7 1.5 GNP GrossLabor force (°/) 1.7 2.3 1.9 per I primary

Most recent estimate (latest year available, 1991-97) capita enrollment

Poverty (% of population below national poverty line) 11 17Urban population (% of total population) 80 74 73Life expectancy at birth (years) 67 70 70Infant mortality (per 1,000 live births) 34 32 30Child malnutrition (% of children under 5) 7 .. ., Access to safe waterAccess to safe water (% of population) 72 73 79Illiteracy (% of population age 15+) 17 13 15Gross primary enrollment (% ofschool-age population) 112 111 107 -Brazil

Male .. .. .. Upper-middle-income groupFemale .. .. _..

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic ratios

GDP (US$ billions) 152.7 268.1 774.9 820.3Gross domestic investment/GDP 23.1 19.1 20.7 22.8 TradeExports of goods and services/GDP 7.0 8.8 7.1 6.2Gross domestic savings/GDP 20.7 21.6 18.6 20.6Gross national saving6.GDP 19.2 17.1 17.3 18.6 TCurrent account balance/GDP -4.3 -1.9 -3.1 -4.1 Domestic Interestpayments/GDP 1.1 2.4 1.1 1.1 Svns InvestmentTotal debt/GDP 21.8 40.7 23.1 23.6 SavigsTotal debt service/exports 37.9 46.8 41.7 45.2Present value of debWGDP .. .. 21.8Present value of debVexports .. .. 280.8

Indebtedness1976-86 1987-97 1996 1997 1998-02

(average annual growth)GDP 2.9 1.9 2.8 3.2 3.5 - BrazilGNP per capita 0.2 0.0 1.8 1.9 2.0 Upper-middle-income groupExports of goods and services 10.3 5.4 6.1 1.8 5.0

STRUCTURE of the ECONOMY1976 1986 1996 1997 Growth rates of output and investment(%)

(% of GDP) 5Agriculture 13.0 11.2 14.4 12.7Industry 39.7 45.2 36.4 37.8 10

Manufacturing 30.4 33.0 22.9 23.4 5

Services 47.3 43.7 49.2 49.5 oa9 7

Private consumption 68.8 67.8 62.2 61.9 _5 ; 93 94 9S 96 97

General govemment consumption 10.5 10.7 19.2 17.5 _GDI GDPImports of goods and services 9.4 6.4 9.2 8.5

(average annual growth) 1976-86 1987-97 1996 1997 Growth rates of exports and imports (%)

Agriculture 3.7 2.5 2.2 2.4 40

Industry 2.7 0.1 3.0 3.8Manufacturng 2.3 -0.2 2.9 3.8 20

Services 2.9 3.1 3.1 3.5

Private consumption 2.5 3.4 4.6 4.5 0o9 94 96 97General government consumption 2.1 -1.6 9.8 8.0Gross domestic investment -2.1 1.2 -0.2 6.2 -20Imports of goods and services -3.3 12.1 5.9 13.9 Exports llmportsGross national product 2.4 1.5 3.2 3.3 1

Note: 1997 data are preliminary estimates. 1/ Poverty estimate is from 1990.The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

FUNDESCOLAII Annex 14

Brazil at a Glance

115

Brazil

PRICES and GOVERNMENT FiNANCE1976 1986 1996 1997 Inflation (%)

Domestic prices2,0--(% change) 2,500Consumer prices .. 147.1 15.8 6.9 2,000Implicit GDP deflator 47.6 145.3 17.2 7.8 1,500 \

1,000Government finance So0(% of GDP, includes current grants) o lCurrent revenue .. 22.3 31.3 32.1 92 93 94 95 as 97Current budget balance .. -5.0 -1.2 -1.6 GDP deflator OCPIOverall surplus/deficit .. -13.3 -5.9 -6.1

TRADE

(US$ millions) 1976 1986 1996 1997 Export and Import levels (US$ millions)Total exports (fob) .. 22,394 47,747 52,986 75s000

Coffee 2,360 2,095 3,094Other food .. 1,562 4,458 5,729 _Manufactures .. 11,839 29,676 32,732 s0000

Total imports (cif) .. 14,044 53,301 61,358Food .. .. 3,279 3,290 2s,000 -i i iFuel and energy .. 3,541 3,459 3,220Capital goods .. 3,464 20,188 26,232 o0 . _S !

Export price index (1995=100) .. 68 100 96 91 92 93 94 95 as 97Import price index (1995=100) .. 85 103 95 U Exports U ImportsTerms of trade (1995=100) .. 80 97 101

BALANCE of PAYMENTS

(UJS$ millions) 1976 1986 1996 1997 Current account balance to GDP ratio (%)

Exports of goods and services 10,848 23,870 51,853 56,827 2Imports of goods and services 14,687 16,576 64,958 74,158Resource balance -3,839 7,294 -13,105 -17,331 10

Net income -2,719 -12,259 -14,141 -18,329 91 92 93 94Net current transfers -3 -26 2,899 2,220 -2*

Current account balance -6,561 -4,991 -24,347 -33,439 -4

Financing items (net) 9,233 -319 33,364 25,629Changes in net reserves -2,672 5,310 -9,017 7,810 -6

Memo:Reserves including gold (US$ millions) 6,542 5,907 60,089 51,729Conversion rate (DEC, local/US$) 3.88E-12 4.97E-9 1.0 1.1

EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1997

(US$ millions)Total debt outstanding and disbursed 33,340 109,026 179,047 193,598

IBRD 1,172 7,546 5,876 5,743 Composition of totRi ,1 996 (USSmillIons)

IDA 0 0 0 0 G: 35,439 1: 3,550

Total debt service 4,278 11,616 25,091 30,000 lE:16,803IBRD 130 1,164 1,638 1,428IDA 0 0 0 0

Composition of net resource flowsOfficial grants 6 30 80Official creditors 384 1,152 -514 -1,786Prvate creditors 5,215 -444 14,514 17,238Foreign direct investment 1,555 320 9,889Portfolio equity 0 0 3,981 F: 117,311

Worid Bank programCommitments 486 1,620 858 1,104 A - IBRD E - BilateralDisbursements 173 1,619 1,500 1,416 B - IDA D - Other multilateral F - PrivatePrincipal repayments 45 608 1,222 1,049 C - IMF G - Short-termNetflows 128 1,011 278 368Interest payments 85 556 416 380Net transfers 43 455 -138 -12

Development Economics 9/16/98

FUNDESCOLA II Annex 14Brazil at a Glance

116

MAP SECTION

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