DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE

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1 Public Disclosure Authorized DOCUMENT OF THE WORLD BANK REPORT NO.: RES30282 Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE Public Disclosure Authorized MEXICO REDUCING INEQUALITY OF EDUCATIONAL OPPORTUNITY PROJECT APPROVED ON OCTOBER 24, 2014 TO THE UNITED MEXICAN STATES Public Disclosure Authorized EDUCATION LATIN AMERICA AND CARIBBEAN Regional Vice President: Acting Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Jorge Familiar Jutta Ursula Kern Jaime Saavedra Chanduvi Reema Nayar Ciro Avitabile

2 ABBREVIATIONS AND ACRONYMS CONAFE GoM ISR PDO National Council for Education Development (Consejo Nacional de Fomento Educativo) Government of Mexico Implementation Status and Results Report Project Development Objective

3 BASIC DATA Product Information Project ID P Original EA Category Not Required (C) Approval Date 24-Oct-2014 Financing Instrument Investment Project Financing Current EA Category Not Required (C) Current Closing Date 31-Dec-2018 Organizations Borrower United Mexican States Responsible Agency Consejo Nacional de Fomento Educativo (CONAFE) Project Development Objective (PDO) Original PDO The objectives of the Project are: (a) to improve parental competencies in early childhood development in targeted rural communities; and (b) increase the transition rate from the primary to the secondary education level in CONAFEadministered schools in targeted municipalities. Summary Status of Financing Ln/Cr/Tf Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed IBRD Oct Sep Dec Dec Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No

4 I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Project was approved by the Board on October 24, 2014 and became effective on December 11, The Project has three components: (1) Early Childhood Development; (2) Mobile Pedagogical Support (Asesores Pedagógicos Itinerantes); and (3) Technical Cooperation, Research, and Innovation. 2. Progress towards achievement of the Project Development Objectives (PDO) and the Overall Implementation Progress were downgraded to Moderately Satisfactory in the latest Implementation Status Report (ISR) in December 2017 due to: i) budgetary restrictions that hindered activities under Component 3, which consequently affected the quality of activities under Component 1. The budgetary constraints delayed the National Council for Education Development (Consejo Nacional de Fomento Educativo, CONAFE) from hiring the firm responsible for implementing the new parenting practices model (Component 1) and the firm responsible for measuring PDO indicator 1 Score of parenting practices among caregivers of children ages 0-4, in selected states (Component 3). Because these two firms responsible for implementation and measurement of the intervention were not hired until later in the life of the Project (October 2017), progress towards achievement of the first PDO remained stagnant and unmeasured. The rating was also downgraded because ii) actual disbursements have been lower than originally estimated. The Project was expected to have disbursed US$125M (83.3%) by the end of June To date, US$80.7M (53.8%) has been disbursed, leaving US$69.3M (46.2%) to be disbursed by the loan closing date of December 31, In contrast, PDO indicator 2, which measures the transition rate from primary to lower secondary education for CONAFE administered school graduates, is above the annual target and most of the intermediate results indicators are in line with or above the initial targets. 3. The proposed restructuring would cancel US$30M (20%) of the original loan amount of US$150M and would adjust the disbursement estimates accordingly, component costs, and disbursement category amounts. The partial cancellation is needed to respond to the substantial change in the dollar-peso exchange rate since Project appraisal, which has increased significantly. A subsequent restructuring due by February 2018 would adjust the Project activities and indicator targets as a result of the partial cancellation. Since the baseline and target values for the updated indicators will not be available by CONAFE until January 2018, the second restructuring would be processed once the indicator values are finalized and provided to the Bank. II. DESCRIPTION OF PROPOSED CHANGES 4. This is the first restructuring of this Project and will be a Level 2 Restructuring. The changes were discussed with the Government of Mexico (GoM) during the Mid-Term Review mission held from September 6-8, 2017 and recorded in the corresponding Aide Memoire. The GoM sent a formal request for the partial loan cancellation on October 27, Once the first restructuring is approved, it will be effective as of the date of receipt of the request. 5. The proposed changes are the following: a. Cancellations Proposed. US$30M will be cancelled due to the increase in the dollar-peso exchange rate since Project appraisal.

5 b. Change in Disbursement Estimates. As a result of the slower disbursement rate and the cancellation, the GoM has adjusted the Disbursement Estimates of the Loan. The lower level of disbursements is mainly due to the increase in the exchange rate and the budgetary restrictions experienced by CONAFE that prevented the commitment of funds for the hiring of two firms under Component 3. The new estimates reflect what was disbursed in fiscal years and what is expected to disburse through the Closing Date of the Loan given the cancellation. c. Change in Components and Cost. i. Component 1: Early Childhood Development The allocation to this component will be decreased by US$21.1M, 18.2% of the original allocation. ii. Component 2: Mobile Pedagogical Support (Asesores Pedagógicos Itinerantes) The allocation to iii. this component will be decreased by US$7.1M, 22.6% of the original allocation. Component 3: Technical Cooperation, Research, and Innovation The allocation to this component will be decreased by US$1.8M, 80.2% of the original allocation. The allocation will be reduced substantially in response to the budgetary restrictions that have prevented CONAFE from executing activities under this component. d. Reallocation between Disbursement Categories. While there are no reallocations between disbursement categories, this section reflects the reduced allocations to the disbursement categories. These reductions reflect the adjustments to the Component Costs described above. 6. The second restructuring would adjust the Project activities and indicator targets. The baseline data was collected in December 2017 for the updated indicators. The analysis to set the baseline and target values is expected to be completed by mid-january Upon receipt of the data, the Bank will process the second restructuring and plans to have it approved by February III. SUMMARY OF CHANGES Changed Change in Components and Cost Not Changed Cancellations Proposed Reallocation between Disbursement Categories Change in Disbursement Estimates Change in Implementing Agency Change in DDO Status Change in Project's Development Objectives Change in Results Framework Change in Loan Closing Date(s) Change in Disbursements Arrangements Change in Overall Risk Rating Change in Safeguard Policies Triggered

6 OPS_DETAILEDCHANGES_COMPONENTS_TABLE OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE Change of EA category Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Change in Implementation Schedule Other Change(s) Change in Economic and Financial Analysis Change in Technical Analysis Change in Social Analysis Change in Environmental Analysis IV. DETAILED CHANGE(S) COMPONENTS Current Component Name Current Cost (US$M) Action Proposed Component Name Proposed Cost (US$M) Early Childhood Development Revised Early Childhood Development Mobile Pedagogical Support (Asesores Pedagógicos Itinerantes) Technical Assistance, Research and Innovation Revised 2.24 Revised Mobile Pedagogical Support (Asesores Pedagógicos Itinerantes) Technical Assistance, Research and Innovation TOTAL CANCELLATIONS Ln/Cr/Tf Status Currency IBRD Disburs ing USD Current Amount 150,000, Cancellation Amount Value Date of Cancellation 30,000, Nov-2017 New Amount 120,000, Reason for Cancellation BORROWER' S REQUEST FOR

7 COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Allocation Actuals + Committed Proposed Allocation Financing % (Type Total) Current Proposed IBRD Currency: USD ilap Category Sequence No: 1 Current Expenditure Category: ECD Sup & Capacity Build Pt 1a & 1b 115,970, ,054, ,870, ilap Category Sequence No: 2 Current Expenditure Category: API Sup & Capacity Build Pt 2a & 2b 31,410, ,630, ,310, ilap Category Sequence No: 3 Current Expenditure Category: NCS & Cs Parts 1c, 2c & 3 2,245, , ilap Category Sequence No: 5 Current Expenditure Category: PREMIUM FOR CAPS/COLLARS Total 149,625, ,685, ,625, OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed ,010, , ,000, ,252, ,000, ,924, ,990, ,853,461.39

8 ,594,