The World Bank


1818 H Street N.W., Washington, D.C. 20433

World Bank Support for Implementation of Summit Goals

Background Note for SIRG Meeting of October 29, 1998.

The World Bank is an international development finance agency, whose primary mechanism for support to its borrowing member countries is the provision of IBRD loans and IDA credits, prepared within Country Assistance Strategies agreed with the government of the individual country concerned. The Bank also undertakes studies on economic and sectoral. policy issues at the national level, in addition to selective programs of research at the global and regional levels.

In its fiscal year 1998 (ending on June 30, 1998), the World Bank approved a total of US$6.04 billion in new loans and credits to member countries within the Latin America and the Caribbean Region (LAC). This included $1.2 billion for education projects; S 1. 1 billion for health, nutrition and other social programs; $562 million for financial sector reform programs; and $696 million for programs of public sector reform.

In the present climate of international economic uncertainty, the World Bank is discussing with a number of its clients the possible provision of packages of fast-disbursing financial assistance. The policy framework within which such assistance will be considered was set out by the President of the World Bank, Mr. James D. Wolfensohn, in his address to the Board of Governors on October 6, 1998, entitled "The Other Crisis". Copies of this address are available in both English and Spanish.

World Bank programs and projects cover a wide range of the policy objectives laid out in the Declaration of Santiago and the Summit Plan of Action. The present note provides a selective report on Bank activities in the five areas where the Bank has specifically been identified within the Summit implementation matrix as playing a supporting role.


Improving and extending education to all was one of the most important commitments to be made by the leaders of the Region at the Santiago Summit. As President Wolfensohn stated in his presentation at the Summit, the World Bank will strongly support the countries of the Region to develop and implement plans to fulfill the goals of the summit. One important element of our support is financial, and Vice President Burki has expressed his strong support for increasing the Bank's lending for education in Latin America and the Caribbean. In the twelve months preceding June 30, 1998, which was our 1998 fiscal year, the Bank made new loan commitments for education in Latin America and the Caribbean of some $1.2 billion, an historic high. And, while the global economic crisis will affect the Bank's investment lending this year, we and the countries of the Region have put priority on protecting educational investments.

Aside from our lending program, the Bank's first and most visible response to the Summit was to invite education ministers, finance ministers, and leaders of the private sector to the Bank on June 5, 1998, to discuss how the public and private sectors can collaborate in the education reform and development agenda agreed to at the Summit. In addition to private and public sector leaders, representatives of the IDB, UNESCO, and other international and bilateral agencies participated in this meeting. Mr. Wolfensohn personally chaired this meeting, and he has reported back to the participants on next steps to stimulate this collaboration further.

The Bank committed itself in the meetings preparatory to the Summit, and at the followup meeting organized by the OAS in Brasilia, to undertake several activities in support of the Summit's education agenda. In particular, in support of Summit goals to improve teaching, we committed ourselves to carrying out a regional study on this issue and to sponsor a regional conference of experts from within and outside the Region in 1999. We are now working with several countries in the analysis of teacher training, working conditions, and management, and plans are well underway for a regional conference to be held the middle of next year. We will invite education ministries in the region to participate in this conference.

The Bank also committed itself to working with countries of the Region to improve access to technology for education, with emphasis on using computers in the schools to develop collaborative learning projects. Several countries are now participating in the Bank's World Links program, which provides technical assistance and computer equipment and training to develop and implement pilots using computers and the internet in secondary schools. This past summer we sponsored with the US National Science Foundation a workshop of teachers from the Americas to develop international collaborative learning projects using the internet. We are now working with several countries to implement an evaluation which will permit us to learn how best to use computers in schools.

In addition, as Mr. Wolfensohn reported to the education ministers at the Summit itself, the Bank is supporting the initiative of the International Education Association to provide technical assistance to countries of the Region to permit them to participate in the Third International Mathematics and Science test, which has already been administered in a large number of countries, including Colombia and Mexico in this region. In addition, we are supporting the World Education Indicators project of the OECD, which provides technical assistance to pennit countries to develop internationally comparable education indicators patterned after the OECD indicators. Several countries of the Region are participating in these two initiatives.

The Bank is also supporting the Summit goal to stimulate international alliances and innovation in science and technology. The Bank has agreed to support the creation of several centers of excellence in science in the Region. These centers will not be physical buildings located in specific sites but, rather, "virtual" centers which establish links and encourage collaboration between the world-class research scientists of the Region. At the request of the Government of

Chile we have agreed to support a first center in that country. Also, it is important to report that we are using a new lending instrument of the Bank to provide this support. This instrument -the Learning and Innovation Loan-provides small amounts of money, up to $5 million per project, quickly to support innovative ideas-and will allow the Bank to be flexible and quick in responding to country requests for assistance in support of Summit goals.

Strengthening Municipal and Regional Administration

Cross-regional program:

The World Bank Group, including the Economic Development Institute (EDI), is supporting a range of programs on the theme of "Intergovernmental Fiscal Relations and Local Financial Management". A major product of this program has been a conference in Santander, Spain on Municipal Finance (October 26-29,1998), which examined - with special reference to the countries of Latin America and Eastern Europe - the issues raised by sub-national governments' growing attempts to gain access to domestic and international financial markets.

Current region-wide non-lending work:

Research project on the fiscal and equity impacts of decentralization in selected Latin American countries. The Bank will also publish a major document on decentralization, which will, in turn, be the key document of the 1999 Annual Bank Conference on Development in LAC, to be held in Chile during 20-22 June 1999.

Current country-specific non-lending work:

Strengthening of Justice Systems and Judiciaries

Since the last meeting in Santiago, the region has made significant advances in promoting justice sector reforms. Recognizing the importance of an independent, efficient and effective administration of justice in social and economic development the Bank has continued its support to member countries. This support has included:

Financial Markets

Banking Sector: The Bank has increased significantly its involvement in banking sector reform in the last years. Virtually all our technical assistance, analytical work and lending operations in LAC dealing with this sector incorporate features aimed at promoting the implementation of the Basle Core Principles on Bank Supervision, as well as other international standards and best practices. At present, we are either implementing or negotiating substantial technical assistance and/or lending operations in support of major reforms in the banking sector in a number of countries in the region, including Argentina, Brazil, Bolivia, Ecuador, Honduras, Nicaragua, and Paraguay. The focus of these operations span a wide range, including state bank privatization processes; improvements in transparency, governance; legal frameworks; prudential norms; supervisory capacity; and prompt corrective actions and their enforcement. In recent months, the Bank has responded to growing client demands for assistance in modernizing and strengthening the legal, institutional, and procedural frameworks to deal with orderly exit or resolution of troubled banks.

Capital markets: The Bank has for long been active in supporting capital markets modernization and reform processes in LAC. At present, we maintain technical assistance and lending operations in various countries (including Argentina, Colombia, and Mexico), aimed at strengthening the legal and regulatory framework, the degree of disclosure and transparency, as well as the basic infrastructure (including custody, clearance and settlement systems), of capital markets. We are also beginning an in-depth regional study on the prospects for capital markets integration in Central America and have launched a major project on the issue of capital markets financing of state and local governments in Latin America and Eastern Europe (see also section on Municipal and Regional Administration).

Pension reform: The Bank has worked with several clients on the reform of their pension systems - both in Latin America and in other regions of the world. In LAC the Bank has done important work in Argentina, Mexico, Uruguay, and Bolivia and is currently working assisting other countries (e.g., Costa Rica and Nicaragua) in designing their pension system reform plans. The Bank's work has covered issues such as assessment of sustainability of existing systems, actuarial modeling of alternatives, assessment of fiscal cost and impact of alternatives, linkages of pension reform to capital markets, implementation of privatized pension systems, and establishment of new regulatory mechanisms. The Bank is also working on second generation reform issues, such as extension of pension reforms to public sector employees and state level pension systems. This work on the financial sector side of pension reforms has been supplemented by work on labor market impacts, social protection issues, and extension of pension reforms to the informal sector.

Clearance and Settlements Systems: In response to the request from Minister Aninat and Secretary Rubin, the World Bank is leading an effort to undertake a series of comprehensive assessments of payments and securities clearance and settlement systems in a substantial subset of the region. A key feature of the project is the formation of an International Advisory Council with representatives from key international and national official institutions. A framework and methodology for the study, in line with best international policies, are being established, to better assure the highest possible quality for the work. In line with the request by the Ministers of Finance of the Western Hemisphere, this project is designed to reach as many of the countries in the region as possible. To achieve this objective, two components of the project are: (1) the encouragement and support of a Hemispheric Council on Payments and Settlement Systems; and (2) the organization and delivery of ten workshops, including some in depth work on Real Time Gross Settlement Systems, Delivery versus Payment, and other topics of interest within the region and internationally. CEMLA and COSRA are both actively supporting the Bank's lead in this area, and they will be working with the Bank throughout the project cycle.

Training of Bank Supervisors: The Bank's activities in this area are multidimensional. For many years, the Bank and the US Federal Reserve have co-organized regular training programs for bank supervisors, including those from LAC. In coordination with CEMLA, the Bank has been running similar programs specifically designed for LAC. The LAC Region and EDI are in the process of upgrading training support in the areas of consolidated supervision, on site inspection of off-shore branches, and the regulation and supervision of off-balance sheet risks. Of particular importance, in the context of partnerships in the training of supervisors, has been the recent launching of the Toronto International Leadership Center for Financial Sector Supervision. Outside partners to this project include the Canadian Government, the IMF, the Canadian Office of the Superintendent of Financial Institutions, and York University's Schulich School of Business in Toronto. The Center is an executive development institute for senior banking, securities, and insurance supervisory authorities. It aims at strengthening financial systems by increasing leadership and managerial capabilities of senior supervisors.

Legal and Regulatory Guidelines for Microenterprise and Small Business Finance: The World Bank is active throughout the Region in supporting reforms to achieve a sustainable expansion of the availability of credit services to microentrepreneurs and small businesses. Much of the effort is centered on: (a) improving the economic environment for financial intermediation by the removal of obstacles in the policy, legal, institutional, tax, and regulatory areas and (b) strengthening the retail capacity of financial intermediaries to achieve a sustainable expansion of financial services to under-serviced sectors through technical assistance programs. In the context of our lending operations in El Salvador and Mexico, for example, the World Bank promotes this new approach to facilitate the commercialization of financial services for traditionally under-served groups. In addition, the World Bank acts as Secretariat to the Consultative Group to Assist the Poorest (CGAP), which distills and disseminates lessons on microfinance best practices, supports innovative development in the microfinance sector, and works to improve the legal and regulatory framework for microfinance institutions.

Property Registration

Over the past six months, the LAC Regional Office of the Bank has moved forward rapidly with its land policy and administration portfolio. Two land-related projects in Guatemala (Land Fund and Land Administration in the Peten), which are being processed as longer-term Adaptable Program Loans (APLs), were appraised during the summer. The Land Fund Law in Guatemala was presented to the Legislature after a consensus building process involving indigenous representatives and the Peace Accord Accompanying Committee (including civil society and ex-guerilla representatives), making special provision for land access by women. The proposed Land Administration Project in the Peten includes provisions for titling lands of indigenous communities, as well as information, training and legal support in indigenous languages.

Preparation work is also underway for Land Administration Projects in Nicaragua and Panama, and for a Land Fund Pilot in Honduras. The GEF-supported Honduras Biodiversity in Priority Areas Project, which includes protected area and indigenous lands demarcation, was declared effective on August 20, 1998. In Nicaragua, the Indigenous Communal Titling Law was submitted to the National Assembly on October 13, 199 8, making the Nicaragua Atlantic Biological Corridor Project effective. A study was also recently completed for Mexico, examining the impact of agricultural reforins and modification of Article 27 of the Constitution on ejidos and their development, and a seminar on International Experience with Land Administration is planned shortly.

In Brazil, the second Land Reform Project, financing market-based land reform, is about to be appraised. This is the follow-on operation to the Land Reform and Poverty Alleviation Pilot Project, initiated in 1998 and intended to disburse in three years, but which, due to unprecedented demand, will be completed by 1999. Elsewhere in South America, the recently approved Caracas Slum Upgrading Project in Venezuela and Urban Property Rights Project in Peru both include the regularization of urban plots. In addition, the ongoing Colombia Natural Resources Management Project has regularized land rights of indigenous and Afro-Caribbean peoples, involving them directly in the surveying process. To date, approximately one million hectares have been titled to these communities. The Bank also continues to support the Land Administration Project in Bolivia, whose purpose is to establish a geo-referenced cadastre system and modernize property registries in selected parts of the country, and the Land Use Rationalization Project in Paraguay which has similar objectives.

In addition, several World Bank-supported programs focus specifically on land issues concerning indigenous peoples. These include:

Preparation of this note was coordinated by the Office of the Vice President, LAC Regional Office, World Bank